Kolkata: When taxes go down, there is only one question in the minds of most households — what’s in it for me? In simpler words, how much money can I save every month after prices decrease? Obviously there is no straight-jacket answer to this question and calculation will vary from family to family. With the exception of a few ‘sin’ goods such as tobacco, carbonated drinks and luxury vehicles, all items of regular use will undergo a decrease in tax rates — 5% to zero, 18% to 12% and 28% to 18%. These are all significant reductions and, as a result, could also lead to significant savings by an average household in the new indirect tax regime.
Let’s take an average household which spends a substantial amount of money on grocery, festive shopping, medicine, health insurance etc. Let’s find out what sort of indicative savings can result from the GST reset, which comes into effect from September 22, 2025.
Grocer’s bill
For our calculation, let’s assume this household to spend Rs 20,000 on groceries, green vegetable etc every month. So far, they had to cough up GST at the rate of 12% on Rs 20,000, or Rs 2,400 a month. After September 22, most grocery products will be taxed at 5% while some will move to Nil tax. A few things will move to the 28% slab too. Let’s take an average of 7% on the amount of Rs 20,000. It works out to be Rs 1,400. Therefore, the savings on this head — Rs 1,000 a month.
Apparel
On a piece of apparel that costs within Rs 2,500, the GST has been reduced from 12% to 5%. Suppose this family used to spend Rs 5,000 every month, which entailed a GST of Rs 600 — 12% of Rs 5,000. Now the tax element will dip to Rs 250 — 5% of Rs 5,000. Therefore, the savings on this count will be Rs 350 every month.
Insurance
Let this family pay Rs 50,000 as health insurance premium every year, excluding a GST element at the rate of 18%. The GST on this premium has been reduced to zero. Therefore, overnight the GST element of Rs 9,000 comes down to zero. In other words, it means this family saves Ts 750 a month on average on insurance premiums.
Consumer durables
Since this GST reduction has been announced right before the festive shopping season, let’s also calculate the savings on expenditure on the consumer durables front. For example, the government has brought down TV sets (bigger than 2 inches) from 28% to 18% — a sharp drop of 10 percentage points. If Rs 50,000 is the price of the TV, the saving is Rs 5,000 straightaway.
If one buys a small car
If a family buys a small car, it will benefit immensely from the reduced taxes. The tax on small and mid-segment cars have been cut from 28% to 18%. If the price of the car is Rs 8 lakh, the GST element will be Rs 1,44,000 at 18% GST. But the family would have to pay Rs 2,24,000 as tax before the tax cut is implemented. The benefit: a straight Rs 80,000.
The above calculations give and idea of the benefits that the GST reform might have for the customer. The prices of a lot of essential commodities are being reduced and there are many expenditures which have not been indicated by the heads listed above.