When provided as "pre-packaged and labelled" commodities, such as pulses, rice, cereals, etc., the GST council in its 47th meeting approved a duty at the rate of 5%. These modifications take effect on July 18, 2022.

Previously, these goods could only be supplied if they were branded and packaged in a unit container. The distinction between branded and unbranded goods has been eliminated to include all pre-packaged and labelled goods under the GST umbrella, even if they lack a unit container and are unbranded. It's important to keep in mind that this modification only applies to goods that meet the criteria for "pre-packed commodities" under the Legal Metrology Act, 2009.

The imposition of GST on necessities like pulses, cereals, and rice has sparked outrage that it will increase costs and have an adverse effect on the average person. This point of view becomes more significant, especially in light of the current economic climate's high fuel and daily-consumables inflation rates, which have had an impact on household budgets.

Also read: A guide on student bank account

The key factor behind increasing GST on basic Items

These modifications only apply to products regulated by the Legal Metrology Act, the majority of which are already being sold with the brand name after paying GST. Thus, it is sufficient to contribute to any discernible rise in revenue collections, unlike the recent windfall tax on fuel. Instead, the Hon. Union Finance Minister made it clear that there were worries about income leakage since some companies were abusing the exemption rule for unlabelled food goods by failing to register them. Due to this, it was decided to revoke the exemption and bring pre-packaged and labelled food products under the GST umbrella.

Though the government took this decision for the lives of the common man, it is extremely crucial to have a look at the impacts it has on the common man.

Positive Impacts

• The introduction of GST served to unify several indirect taxes, including CST, VAT, service tax, SAD, CAD, excise, and others.
• The cascading effect of taxes, or tax on tax, was stopped with the introduction of the goods and services tax.
• Manufacturing costs will decrease as a result of the GST's reduction in the tax burden on the manufacturing sector. As a result, it is also expected that consumer goods prices will drop.
• Some products, like vehicles and FMCG, will be a little less expensive as a result of decreasing manufacturing costs.
• As a result, the average person will have to spend less money to obtain the same goods and services that were previously more expensive.
• Pricing strategies will boost demand and consumption of commodities either directly or indirectly. Demand growth will ultimately improve supply. As a result, this will eventually lead to an increase in product production.

A rise in production will eventually lead to more job possibilities. However, this is only possible if consumers receive things at lower prices. This will reduce the flow of illicit currency. It won't be possible unless the kaccha, or invalid bill, system that merchants and shopkeepers typically use is examined.

Negative Impacts

• Proper accounting and invoicing are required for improved compliance. However, several businesses are creating GST accounting software.
• The prices of the goods could rise if the real benefits are not distributed to the buyer and the vendor widens his profit margin.
• The increase in inflation can be seen at first, but it may also decline gradually.
• Profiteering actions will need to be closely monitored in order for the final consumer to experience the true benefits of the GST.
• Businessmen with compliance obligations must submit GST and timely file returns.
• It's not as simple as it seems to file GST returns. Entrepreneurs must designate a tax expert to oversee it.
• The government is taking measures to simplify and make filing taxes easier. Even so, it will take time to genuinely streamline the whole procedure from beginning to end.
• Large organisations with sufficient staff can manage the entire process with ease, but for small firms, service providers, or individuals who have only recently launched their enterprise, it is still complicated.

Now, if we focus on the fact that this regulation was passed by the government, it must have some major benefits affecting the government as well. Let’s have a look at those benefits.

Also read: How do Government bonds work?

The major key benefits to the Government

• One Tax One Nation served as the slogan for the introduction of the Goods and Services Tax (GST). Markets that are open and transparent encourage foreign investment and advertise Indian goods on a global scale.
• In addition to expanding the market for Indian goods and services, attracting foreign investment will also aid the import and export sector. Better work prospects are generated as trade increases.
• The nation's unemployed will find employment, and newer enterprises will enter the market. The nation's general economic situation will get better.
• The development of states will benefit from an improvement in the nation's general investment climate.
• SGST and IGST rates that are uniform will lessen the motivation for tax avoidance.
• Reduced compliance costs due to the absence of different record-keeping requirements.

Also read: All you need to know about Public Provident Funds

The Bottom Line

As was previously said, the GST has both benefits and drawbacks for the average person. On the one hand, it can reduce final prices in particular industries while, on the other, it might cause final prices to skyrocket. The elimination of the cascading effect (Tax on Tax), which lowers the price of the final product, is one advantage that has been passed on to all.

Due to the four-slab rate structure of the GST, the new tax system causes initial problems for the nation. The new Goods and Service Tax (GST) Regime will assist the nation in the long run because it has created a simple and incomplete framework for comprehending personal finances.