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The GST regime may have one unintended consequence: It may steal the thunder of the Budget speech when it comes to making changes to indirect tax rates.
Direct tax will take the centre-stage in Part B of the Budget document. And this will happen rightaway, when Arun Jaitley rises to read out his Budget for 2018-19, the first such exercise since the ushering in of the landmark Goods and Service Tax regime.
This is because, for the sake of GST, the Centre has let go of its exclusive powers to tax manufacture of goods (that is, excise) and provision of services (service tax). On their part, the States have given up their exclusive powers to tax sale of goods (sales tax/VAT).
With the rollout of GST, the Centre has to get the GST Council’s nod before effecting any changes in the CGST rates. So, tax experts do not expect Jaitley to announce any big ticket indirect tax rate change.
At most, they say, one will see Customs duty changes (on the indirect taxes side) in Part B. It is likely that Jaitley will focus more on direct taxes, delivering on his promise to cut the corporate tax rate, besides making some marginal tweaks to individual tax slabs.
Pratik Jain, Partner and Leader-Indirect Taxes, PwC India, said that only basic Customs duties, which are outside the GST, can be changed unilaterally in the upcoming Budget. Tobacco and petroleum products (where the GST is currently Nil) could get impacted if the basic Customs duties were to be tweaked.
Consent of GST Council“It is unlikely the Centre will do anything unilaterally on the CGST rates in the Budget. The Budget has no role to play. To move the Central GST rates, the Centre will first have to go to the GST Council. It is unlikely the Centre will do anything without taking it to the GST Council,” he said.
R Muralidharan, Senior Director (indirect taxes), Deloitte in India, told BusinessLine that any change to the GST rate will have to get the nod of the GST Council.
“Other than basic Customs duty, no other indirect tax can figure directly in the Budget. I don’t think anything that is the subject matter of the GST Council will come in the upcoming Budget. The consent of the GST Council is a must for anything on GST,” Muralidharan said.
But the Budget will have an estimation of the indirect tax revenue for 2018-19 and the Finance Minister will have to work with the GST Council to achieve the revenue target, he said.
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