The cost of parenting has gone up in the recent years. The child care expenses are touching the sky. Many families would like to have a second child but in the present scenario, this can be an expensive decision.
While making a purchase decision related to your child, there are no compromises. As a parent, we tend to ignore the price tags. Whether it is baby food, medical expenses, toys, education, extracurricular or sports, it’s all a no-questions-asked-spend. However, while parents are ready to dig in deeper into their pockets, the taxes getting added at the end may burn a hole in them.
GST Impact: Know What’s Costlier And Cheaper
Take the recent GST slabs as an example. Products and services related to childcare such as food, clothing, medicine, toys, and education are all going to be taxed. However, whether the GST policy will result in a sharp increase in the already demanding cost of living of the country, or give it a slight breather, is yet to be seen.
Coming to the food sector, we observed that there is no tax charged for essential food items such as milk, eggs, curd, fish, fruits, veggies, bread, salt, and flour. However, products such as skimmed milk powder, packaged food, pizza bread, cashew nuts, and raisins come under the GST slab of 5%. Dairy products such as butter, cheese and ghee, and fruit juices, snacks, and ketchup are taxed at 12% while savories such as biscuits, jams, cakes, pasta, and ice creams are all taxed at 18%. This will lead to an increase in the price of commonly used luxury food items and will reduce the purchasing power of families. Apart from the lower class, even upper middle class may limit their use of buying such products.
GST Rates: A challenge For The Toy Industry
With the proposed rate of taxes, toys are likely to become more expensive, which raises concerns over the affordability of products that are quite important to the overall development of children in their formative growth years. The toy industry in India has, therefore, come together to raise a common concern against the recently announced GST rates.
Toys are an imperative companion of a child, right from its first rattler to its treasured RC car or doll house.
As you know, toys have been proven to aid and positively affect the development of children – from building cognitive and motor skills to support and improve learning techniques and imagination. Child psychologists and experts in childcare and child development have also propagated that toys and games come with an intrinsic value that adds to the overall learning and development of children.
Price Of Toys To Increase By Upto 20% Post GST
If you need to buy a creative toy for your growing kid, be ready to shell out ~20% more than the current price. The educational toys, currently exempted from tax, are now in the 28% GST bracket. The traditional toys @ 12% GST, and electronic toys @ 18% GST against the current taxes of ~6.5% mean a sizeable increase in your family expenditure.
From an exchequer point of view, this is a good strategy to widen the tax net; and indirect taxes like the GST ensure that people who somehow get away from the direct tax net, have no choice but to pay up. However, it would help parents if there is some parity between the types of taxes and categories of the taxpayers. One way is to consider allowing GST payments as an offset in the income tax via tax return refunds.
In the Smartphone enabled digitized world, toy manufacturers already find it challenging to attract parents and kids into buying physical objects. An enabling framework by the regulators will surely help this cause.
Commenting on the revised GST rates, Ishmeet Singh, Country Manager – India, Mattel Inc., added, “We urge the GST council to reconsider the high GST rates that are still applicable to the category of traditional and electronic toys. Toys, undoubtedly, play a critical role in the overall growth of children, lending themselves to the development of crucial physical, cognitive and social skills. The pre-GST tax incidence is only to the tune of 5.5% VAT given the rebate on excise, recognizing the importance of toys for children. The GST tax rates announced – 12 % & 18 % for toys – would lead to an increase in prices, which could have a far-reaching impact on the industry, making toys of value more expensive and leading to a growth in counterfeit and unsafe toys in the market. While we welcome the revision in the GST rates for board games, which has been revised to 12% from the previously mandated 28%, we hope that the government will take cognizance of the role of toys in early childhood development and give their continued support in promoting toys. We request them for one uniform GST rate for the entire category as per the current incidence of tax.”
Speaking out about the revised GST rates announced by the GST Council, Vivek Jhangiani, The All India Toy Manufacturers’ Association (TAITMA) said, “While the toy industry is definitely thrilled that the GST council has rolled back the recommended 28% tax rate on board games, revising it to 12%, there has been no change in the tax slabs for traditional and electronic toys. At the current rate of tax, not only the toy industry but also the consumers will be negatively affected. We, The All India Toy Manufacturers Association, would like to reiterate our longstanding request to the government to correct the different rates of toys to one rate for all products sold for the benefit of children.”
So, What Do The Parents Say?
“As a working mother of two, toys are a great way to keep my children engaged, while I take care of my domestic responsibilities. Now GST on toys will add to my financial burden as toys are not a one-time buy for my family.” – Sneha Saraf, mom and management professional
“Everything is either expensive or more expensive when it comes to children. Toys are an inseparable part of a child’s life, and with the introduction of GST, it will have an adverse impact on my buying decision for my little one.” – Soumya George, full-time mom and part-time freelance writer
“The already hobbling toy industry will be affected further and educational board games such as Chess, Checkers, and Scrabble will become a rare sight in homes with growing children.” – Anita Denra, mum and painter.
So, What Can A Parent Do With The Ever Rising Taxes?
The likes of GST are uncontrollable, said Rohit Shah, Founder & CEO at Getting You Rich. He suggests that parents should find decent alternatives to the most expensive thing they want to buy for their children. Principles of delayed gratification, budgeting, managing discretionary spend are all good for even children to learn and respect the value of things at an early age, added Shah.
What Should We Expect From The Regulators?
The GST framework, in its current form, has the potential to put brakes on a child’s development. And, the toy industry remains united in its plea to the government and the GST council to consider the adverse effect of the higher tax slabs and provide relief to consumers in subsequent revisions.