GST rollout uncertainty hits Budget 2017 calculations
The original expectation was that the budget would not touch upon excise duties and service tax as they would be rolled into the multiple-rates GST structure, which was to come into being from April 1, 2017.
But with hopes of meeting the April 1 deadline receding, the government will have to quickly take a call on whether it will rejig indirect taxes in the budget to prepare for the launch of GST or leave them as they are till the new regime comes into force.
The final decision could have ramifications on revenue estimates and collections for the next fiscal year as well as the levies imposed on different products and services. According to the GST constitutional amendment passed by Parliament last year, the current indirect tax regime will lapse by September 17.
“The budget is a challenge as neither the date nor the rates (which products would get classified in which bracket) are likely to be finalised by February 1. Further, the breakup of CGST and SGST still needs to be agreed between the Centre and states,” says Pratik Jain, leader, indirect taxes, PwC.
Most government officials said it is unlikely that indirect tax rates would be changed, but it is possible that exemptions and other distortions in the indirect tax structure could be removed. The government could attempt at rationalising the structure in line with the proposed GST framework but rates may be left unchanged,” said one official.
One of the options is to go ahead with the taxation regime that is in force as of now and prepare estimates on the basis of current taxes. “Revenues can be presented as it is with current taxes and a foot note on GST…Changes can be made when the revised estimates are presented,” said a second government official.