GST 2.0 is here! If you aren’t already aware, FM Nirmala Sitharaman on Wednesday evening announced the new GST structure that would further generalise the indirect taxes on items.
The latest GST Reforms aren’t just to simplify the tax structures but to also provide more liquidity and savings to individuals and households as the common household items would get cheaper as they move to a lower tax structure.
But these GST Reforms will do more for you than just lower price tags. It will quietly help you create space in your monthly budget. Think of these GST Rate cuts as a small, automatic raise that you didn’t have to ask for. The smart move for you would now be to capture this raise for your benefit before it disappears into impulse spends, and make it work for your goals.
Turning the Rate Cuts into Real Savings
We have used an example of a practical family budget across groceries, educational stationery, appliances, clothing and apparels, insurance premiums, an upcoming car purchase, and other household items, the new rate reduce the annual bills and create additional annual savings. Let’s take a detailed look on how these cuts will impact the family savings.
| Particulars | Previous Cost | Previous GST | New GST | New Cost | Savings |
|---|---|---|---|---|---|
| Annual Groceries Budget | ₹2,00,000 | 12% | 5% | ₹1,87,500 | ₹12,500 |
| Annual Educational Stationery | ₹1,00,000 | 12% | 0% | ₹89,286 | ₹10,714 |
| Appliances Budget | ₹1,00,000 | 28% | 18% | ₹92,188 | ₹7,813 |
| New Car | ₹12,00,000 | 28% | 18% | ₹11,06,250 | ₹93,750 |
| Clothes & Apparels | ₹40,000 | 12% | 5% | ₹37,500 | ₹2,500 |
| Insurance Premiums | ₹1,00,000 | 18% | 5%* | ₹88,893 | ₹11,107 |
| Other Household Items | ₹1,00,000 | 12% | 5% | ₹93,750 | ₹6,250 |
| Total | ₹18,40,000 | — | — | ₹16,95,456 | ₹1,44,544 |
*For Insurance Premiums we have assumed 5% cost as not all GST based savings would quantify in net savings. Source:- Times of India, EduFund Internal Research
As you can see if a family has an upcoming car purchase, the first year savings would turn into ₹1.4 Lakhs because of the rate cuts. From Year 2 onwards, these net savings can be as high as ₹40,000 ignoring the car purchase and keeping the appliance budget recurring every 3 years.
This extra money is easy to miss because it shows up as slightly lower costs/bills across spends. But when you add it up; the numbers start to look meaningful.
But you don’t have to stop here. These savings can help you level up your portfolio and fuel your goals further. For instance, if you invest the savings that you make every year because of a lower budget, your portfolio can grow additionally to around – ₹3 Lakhs in 5 Years, ₹7.5 Lakhs in 10 Years and a whopping ₹15 Lakhs in 15 Years.
In short, GST 2.0 can help you quietly fund your future.
The Plan to Level Up
If you were planning to purchase a new car this year or very soon enough, the rate cuts will help you save a high amount now. So instead of upgrading on the model or the variant, you can use these windfall gains to strengthen your investments and jump-start compounding. You can consider these options
– Top-up your Emergency Fund
– Close High-Interest Loans
– Invest the remainder of the money in your long-term investments.
Lock in a Habit from Next Year
The year of your car purchase will help you save and invest a larger amount. But apart from the car related savings, there are other additional savings across your budget. Convert these regular and small savings into an automatic investment, so it never gets lost in lifestyle aspirations.
The next big savings would come from the cost on Insurance Premiums that you will save. Plan your regular investments around your Insurance Premium date so you don’t miss investing. Or instead, simply top-up your Monthly SIPs by the amount that you expect to save.
In our example, the annual savings apart from car purchase would be about ₹40,000 which roughly translates into a SIP of ₹3,000-₹3,300. Align these SIPs according to your time horizon. Let us see how this will impact your portfolio.
| Particulars | Amount |
|---|---|
| Net Savings on Year of Car Purchase | ₹1,40,000 |
| Additional Investments Every Year | ₹40,000 |
| Portfolio Growth After 5 Years | ₹3,06,691 |
| Portfolio Growth After 10 Years | ₹7,62,553 |
| Portfolio Growth After 15 Years | ₹14,96,724 |
Source:- EduFund Internal Research. We have assumed 10% Annual Returns for Investment Calculation.
Look how the small savings invested correctly translate into big amount that would help you upgrade your future goals or achieve a fresh goal.
Why This Approach Works
– No Sacrifice: You are investing the money that you weren’t actually counting on.
– Consistency beats Intensity: Small, Steady SIPs compound powerfully over time.
– Goal Linked Investing: Investing with a purpose will help you stay on track, and reduce impulsive spends.
Many individuals and households will let the GST Rate Cuts slip into extra shopping. You can choose differently by channelling these savings due to these GST reforms into additional investing. So, take a chance, make a smart move, and let the GST 2.0 be the reason why your Portfolio levelled up.
Disclaimer: The data in this presentation are meant for general reading purpose only and are not meant to serve as a professional guide/investment advice for the readers. This presentation has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been suggested or offered based upon the information provided herein, due care has been taken to endeavor that the facts are accurate and reasonable as on date. The information placed on the presentation is for informational purposes only and does not constitute as an offer to sell or buy a security. The Company reserves the right to make modifications and alterations to the content available on the presentation. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. The EduFund platform & the website is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. An affiliate of the Company, i.e. Edubillions Tech Private Limited is registered with AMFI as mutual fund distributor bearing the registration number ARN258733. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market.
About the author
Niraj Satnalika
Head Of Research,EduFund
Dr. Niraj is a finance professional with 12+ years of experience and is part of the founding team at EduFund. He’s worked with Goldman Sachs, CRISIL and Sakal Media in roles spanning investment management, research and leadership. With a PhD in Finance from IIT Bombay, he brings deep expertise in valuation, governance and education planning. When he’s not teaching or writing, you’ll find him cooking or going on long drives.
