GST & Dying Middle Class: How Middle Class Pay the highest tax?

Why Does The Middle Class Pay More Taxes?

While the middle class in India has long been the backbone of the economy, it now seems to be in the grip of most tax reforms. Rising inflation along with stagnant income growth and a continuously increasing GST regime have made their lives miserable. While the economy has grown, the realities faced by this part of society remain unchanged.

The GST Council declared on Saturday that GST on popcorn seasoned with salt and spices will be subject to a 5%. On the other hand, caramel popcorn, which is classified as a sugar confectionery, would be subject to an 18% GST, while pre-packaged and branded popcorn would be subject to a 12% tax.

In today's blog, we'll see the reasons behind the middle class paying more taxes in India. Keep reading to understand.

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Finance Minister Nirmala Sitharaman explained the reasoning behind the 18% tax on caramel popcorn by stating that every product with added sugar is subject to a distinct tax, thereby classifying caramelized popcorn as a "mithai."

This blog will inform the latest on GST rules affecting our daily lives, understand how the middle class is paying the highest tax in India, and why it matters that we raise our collective voice the same way that villagers did in the iconic film Lagaan. The only difference is this "lagan" is imposed by our government, not colonial rulers.

 

GST On Sale of Old Vehicles

Let's start with some changes that have sparked discussion about GST on old car sale. Finance Minister Nirmala Sitharaman announced an 18% GST on sale of old vehicles for the resale of old cars. The twist here is that no Goods and Service Tax is involved if you sell your car as an individual. However, when it is sold to a registered dealer, the dealer is liable to pay GST. They simply pass on this cost to the next buyer. Really bitter for the end consumer- usually the middle class looking to squeeze in better deals.

It is a bigger issue, whether GSTA or income tax; the middle class always bears the load. 

A Dip into GST: How It Works (GST Slabs)

There are 5 GST Slabs in India: 0%, 5%, 12%, 18%, and 28%. While the 0% slab features essentials such as milk and eggs, luxury goods and high-end products are expected to have a GST at 28%, besides additional cess. Some essentials, everyday goods, and luxury items would have the breakdown as follows:

Essentials (0%): Milk and eggs, curd, and education services.

Everyday Items (5-18%): Paste, hair oil, and packaged foodstuffs.

Luxury Items (28%): Cars, high-end motorcycles, and other consumer durables.

In addition, intrastate supplies are going to be levied Central GST (CGST) and State GST (SGST) while when there is an interstate supply it goes under the New federal GST system as Integrated GST (IGST).

Thus, for instance, a new car, once purchased, attracts 28% GST; once registered, there is a road tax after which toll taxes every time the car is driven on the highway. Fuel prices are further increased since they have embedded taxes. Therefore, one becomes aware of the depth of taxation within everyday life. 

Middle Class: Backbone of Economy

The middle class, generally speaking, is the backbone of India's economy. It brings: 

Buyers of Commodities: Corporations rely on the middle class to buy their products.

Workforce: The majority of the middle class consists of corporate employees.

Tax Payers: Reports, including one from India Today, show that the middle class pays more taxes than corporates. Individual income tax collections surpass corporate tax collections in 2024.

These taxes are indeed high for the middle class. There is limited relief from financial stress being felt by the people themselves.

Middle Class Struggles: A Never-Ending Cycle.

From education to daily expenses, the middle class gets taxed at every stage of life:

Education: Costs incurred for tuition fees, books, stationery, and all coaching centers in the end go to the Tax.

Daily Living: Even groceries, toiletries, and utilities carry GST.

Housing: Home buying comes with different costs that include: stamp duty, registration fees, and property tax on houses.

Leisure: Movie tickets cost GST, and even popcorn is taxable now.

Transportation: Cars, fuel, and tolls are heavily taxed with nothing coming close to the improved standards of infrastructure in the country.

Where Do We Go From Here?

It will require two approaches for the journey ahead.

Awareness and advocacy: Citizens must be informed on how taxes affect them and demand transparency and accountability from their government. Spreading such information, as in this blog, will certainly go a long way in raising awareness.

Demand Better Services: Taxes may be inefficient; however, citizens deserve better infrastructure and services in return. From pothole-free roads to improved public transportation, the government must ensure that taxpayers get value for their money.

Conclusion

The middle class lives in a vicious cycle of taxes: earn, pay the income tax, spend on basic goods and services with GST, and save for large purchases such as homes and cars, which attract even more taxes. It is high time we collectively raised our voices to advocate for a fairer system. 

Let us ensure that the middle class, the spine of India, does not bend under the unjust weight of taxation. Let us share this blog, start speaking, and demand the change we need for a more equitable future.

DISCLAIMER: This is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.