GST Impact on Weekend/Recreational Expenditure
By: – Craig Dsilva
Goods and Services Tax – GST
Dated:- 24-7-2017
“Weekends don't count unless you spend them doing something relaxing.”
With the introduction of the Goods and Services Tax on 1st July 2017 spending on leisure or recreation activities is expected to burn a hole in your pocket.
Below is a sample illustration:
Mr X and Mrs X are newly married. They are in their early 30's. Mr X earns 7 Lakhs p.a. while Mrs X earns 7.56 Lakhs p.a. Hence their total income is 14.56 Lakhs (assuming net take home pay). They decided to follow a simple process of spending 25% of their income on Savings, Investments, Necessities and Recreational expenses respectively. 25% of ͅ
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unge/ Luxurious Locations
7000
25%
1750
28%
1960
210
8
Helicopter Ride (15 Minutes)
8000
15%
1200
28%
2240
1,040
9
Shopping Mall (Branded Merchandise)
9000
12.5%
1125
18%
1620
495
10
Yacht Cruise (2 Hours)
10000
18.5%
1850
28%
2800
950
11
Casino/Betting (Horse Race)
11000
18%
1980
28%
3080
1,100
12
Upgrading Gadgets (Once in 3 Months)
12000
6%
720
12%
1440
720
13
Resort Vacation 2N/3D (Tariff>2500)
13000
22.5%
2925
18%
2340
(585)
Total
91000
Net Increase
4,545
*Note: This refers to the average rate of tax in India. It includes Entertainment tax, Service Tax, Value Added Tax and other local body taxes.
As you can see from the sample illustration above, the couple wil
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hould be a single rate of tax since the rich will spend more and will have an increased tax burden even with the same rate. For instance, if a hotel room is booked by a middle class person usually in a 3 star with a tariff of ₹ 5000 the person spends ₹ 900 as GST i.e. at the rate of 18%. If a rich person books a hotel room in a 5 star, with a tariff of ₹ 15000 the person spends ₹ 2700 as GST at the same rate of 18% which is more than the ₹ 900 spent by the middle class person. If the person is taxed at the current rate of 28% for 5 star hotel room then the person has to spend Rs 4200. The rich person will argue that this is a double punishment, since such a person is already paying more income tax charged at a
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