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Tax burden to a common Indian

Discussion in 'Investment Analysis' started by nirajshah, Oct 8, 2017.

  1. nirajshah

    nirajshah Champion

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    Good calculation.

    On a bank deposit of Rs. 2000/- for one year, what you get is Rs. 160/- @ 8% interest.

    On a bank loan of Rs. 2000/- for one year, what you pay is Rs. 260/- @ 13% interest.

    But when you eat food for same Rs. 2000/- you pay Rs. 360/- @ 18% to Government!!

    This is real nice!
    Just to remind.. How much we pay for buying an item worth Rs 1000.

    Assume that I need to buy an item of base price of Rs 1000.
    Assume it attracts GST @18%
    I will need to pay Rs 1000 + Rs 180 = Rs 1180 for that item.

    Now, I need to earn Rs 1180 first, to be able to pay this amount.

    Assume that I am in the 20% Income Tax bracket (income between Rs 5 Lakhs and Rs 10 Lakhs per year).

    If I earn Rs 1486.15, then I will have to pay Income Tax of Rs 297.23 (@20%), and a Cess of Rs 8.92 (@3% of the Income Tax), and that will leave me with an earning (after Income Tax) of Rs 1180.

    Hence, to buy an item of base price Rs 1000, I need to earn Rs 1486.15.

    Which means that I pay Rs 486.15 in taxes on the purchase of an item of Rs 1000.

    And that, dear people, implies a tax of over 48.6% paid overall (through both direct and indirect taxes).

    Now, this figure will be far higher for items in the 28% GST slab. (It will be 61.2% in total taxes).

    And that, friends, is the real cost of money to you.

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    nirajshah, Oct 8, 2017
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  2. chaitanya_mella

    chaitanya_mella Contributor

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    Very narrow view. Looks exorbitant on paper. Doesn’t factor in the reduction in cost for most essential items. And that should weigh heavily on the average.


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    chaitanya_mella, Oct 8, 2017
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  3. shabbir

    shabbir Administrator Staff Member

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    Reduction is cost are for the manufacturer but ultimately the enduser who will be taxed.
     
    shabbir, Oct 9, 2017
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  4. chaitanya_mella

    chaitanya_mella Contributor

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    The complexities of GST has also read to reduction in cost for end user. So if you have to average it these reductions should be factored


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    chaitanya_mella, Oct 9, 2017
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  5. nirajshah

    nirajshah Champion

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    I shared a WhatsApp fwd and this isn't comparing pre and post gst but tax on absolute terms.

    Also I did share because it isn't over exaggerated by calculation using highest slabs either.

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    nirajshah, Oct 10, 2017
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  6. chaitanya_mella

    chaitanya_mella Contributor

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    Hey... sorry. It wasn’t personal. Just wondering if all the calculations showing benefits of GST or drawbacks actually factor in all available data...


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    chaitanya_mella, Oct 10, 2017
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