Gift Yourself the Power of Digital this Year

Digital banking saves the day at a time when higher taxation spells increased spending.

The Goods and Services Tax (GST) rolled out all over the country from July 1, 2017. Since then, consumers have been dreading a rise in prices of daily commodities. Let’s take a look at how GST affects the consumer.

How GST affects your monthly expenses

From now on, there is bound to be higher taxation on almost all categories of products and services. GST promulgates an 18% levy (9% CGST plus 9% SGST) on every purchase and investment that you make. This is a higher tax bracket than the earlier system. However, GST also has the potential to reduce prices. For instance, the pricing of items under the previous tax structure was based on the product’s base price, plus varying taxes like octroi, service tax, VAT, etc. These indirect taxes are now abolished, so effectively, the product’s price should be reduced.

Thus, while GST has raised the tax rate for products and services, effective monitoring will ensure that retailers and businesses pass on the benefit of reduced prices (owing to GST) to the customer. In the meantime, customers must grapple with the spectre of increased restaurant and shopping bills, higher pay-out on insurance and investments, increased prices of daily items, etc. Basically, GST has increased monthly expenditure across the board, while a few categories are exempt.

Change your spending habits NOW

It is about time that each of us changed the way we use our money. The demonetisation exercise of November 2016 showed that hoarding cash at home is no longer a feasible option. It is better to keep all spare cash in the bank account. This helps you keep track of finances better than before.

Use digital banking: It is also time to use your bank’s digital banking services as much as possible. In times of increased expenditure, you will be hard pressed to physically keep track of every Rupee that you spend. But the e-banking app has an expense tracker and it shows your account summary in seconds, so you can be appraised at all times.

Use your phone to spend money: Earlier, phone banking in India meant calling up the bank to ask about account balances and other services. Today, phone banking is a tool whereby you are in full control of your finances, using your smartphone to conduct transactions, shop, pay bills, etc. You don’t need to spend cash on any purchases if you use your phone and e-banking services.

Convert to a zero balance account: Now, more than ever, it is time to convert your savings account to a zero balance account. It functions like a checking account without the hassle of maintaining a minimum balance. You also get a high 7% interest rate on your savings deposits.