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Dr. Sanjiv Agarwal, FCA, FCS
Sanjiv Agarwal PhotoWhile the Government still claims that it is actively working to see GST roll out from April, 2017, much would depend upon next week’s GST Council meeting. States have indicated that it could be doable from any time between June and September, 2017.

It is, however, becoming increasingly clear that Union Budget-2017 may be presented in Parliament on February 1, 2017, a month ahead of usual last day of February and that Goods and Services Tax (GST) may not be introduced in April, 2017, everybody is guessing as to what will Budget have in store on Indirect Taxes.

GST enrolment drive is ongoing since November, 2016 despite the fact that we do not have GST laws in place. More than 50 percent of existing VAT assessees have migrated and enrolled on GSTN system despite the uncertainty over the GST rollout. GSTN which stands for the platform and the body administrating it, is in the process of being fully geared up for April, 2017 (though it may not happen).

If Government may so feel, it may increase the rate of Service Tax to avoid any revenue loss due to delayed GST. This will serve dual purposes – will improve revenues and bring Service Tax rates closer to standard GST rates.

Since the likely standard rte of GST would be 18 percent as decided by GST Council, there is all likelihood that Service Tax rate may be increased to 16 or 18 percent. This would result in higher revenues to centre as compared to GST regime where rate is likely to be lower for some select services.

We can look for the following in Budget- 2017:

(1) Clear road map and Government’s irrevocable intention on GST implementation

(2) A forward looking statement on demonetization effect and way forward

(3) Black money management and Government’s  road map to have black money / corruption free economy

(4) Moving forward on path of cash less or less cash economy

(5) Big push to infrastructure and developmental initiatives due to likely increased direct tax revenue generation (as a result of demonetization drive) including higher allocation for roads, ports housing etc.

(6) Reforms, revival and development of railways

(7) Custom duty proposals as usual

(8) No or minimal tinkering with Central Excise and Service Tax provisions including rate of taxes

(9) Proposals for compensation to states due to likely GST revenue loss. (Government should also spell out if losses are not as expected, how will amount collected be applied and whether rate of taxes / cases be lowered)

(10) Laying GST Bills in Budget session itself

For the first time, Union Budget will include (subsume) railway budget in it as there will be no separate railway budget. This would also mean a total fact lift for railways in two ways, moving on to accrual based accounting and second, an independent authority to recommend changes in fares and fright tariff.

With general elections having been announced in five states from 5th February till 8th March, 2017, the combined opposition is now demanding that Union Government should not present the Budget on 1st February, 2017 as it could influence the voters in election states. However, Government does not want to delay the budget, and rightly so. It appears that they are going ahead on this and we will have Budget on 1st February, 2017 only. Two new things in Budget will happen- one, preponement by a month on 1st February (a first) and a combined Finance and Railway Budget (another first).

Developments in Budget session shall also pave the way for future of GST. Government may also try to lay GST Bills in the Budget session. Even if GST bills have to fail, these should go to Parliament now.

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July 2024