October 2, 2017

Should I pay GST?

In the pre-GST days, there was always an option where you could transact in cash and save some tax.

Now in the post-GST days.

This extended weekend I went for a small holiday to a resort near Mumbai.

For academic purposes, let's assume my bill for a 2 day stay came to 10K incl food. The GST rate was 28% which the resort helpfully hinted I could save this if I made the entire payment in cash AND did not insist for any bill.

28% GST is Rs.2800/-.

What should I have done?

Be a loyal patriotic citizen/ desh bhakt and pay the tax not knowing when I will get the benefit OR pay in cash and save the tax?

Money in hand is always better than some vague benefit promised to me in the future. 

Short summary - I paid in cash and saved the 2800/-. But here is the interesting part. Much as you may think I am benefiting or the country is losing, it is not so simple.

The money I save is bound to be spent... maybe on clothes, consumables, daru sharu etc. The hotel is happy as consumers get a better deal. They are creating employment so if customers are happy, they can get referral business.

So I get the instant gratification of saving money (means earning money) versus some perceived benefit i MAY get in the distant future.This feeling is some kind of a high one gets when one gets a good bargain in a sale etc (see how people run for sales in malls).

What would you have done in this situation?

I will add a twister. Your thinking will change if final bill amount is Rs.200/- + 28% GST versus Rs.20,000/- bill + 28% GST. The percentage loss is exactly the same in both cases but the pain of losing is more in the latter case than in former.

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