FM’s As­sur­ance About GST Be­ing on Track Cor­rob­o­rates Govt’s In­tent for Ear­li­est Roll­out

The Economic Times - - Front Page -

No news is good news. This per­haps best sum­marises the in­di­rect tax pro­pos­als pre­sented in the bud­get. With GST round the cor­ner, any sig­nif­i­cant changes in the ex­cise/ser­vice tax regime would have caused un­due hard­ship to the tax­pay­ers, pos­si­bly with no com­men­su­rate ben­e­fits.

As ex­pected, the fi­nance min­is­ter did speak about the progress that has been made on all fronts around GST roll out. While he did not specif­i­cally men­tion July 2017 be­ing the tar­get im­ple­men­ta­tion date, he pro­vided enough as­sur­ance about GST be­ing on track, with no ma­jor hur­dles left to be crossed. In fact, the aware­ness ses­sions for tax­pay­ers will com­mence from April, which further cor­rob­o­rates the in­tent of the gov­ern­ment to roll out GST at the ear­li­est.

Purely from a GST per­spec­tive, there was a case to in­crease the ser­vice tax rate from 15% to say, 18%. How­ever, the gov­ern­ment’s de­ci­sion not to go ahead with the hike will come as a pleas­ant sur­prise to both in­dus­try and the com­mon man. While one will have to brace for an in­crease in tax in­ci­dence on ser­vices un­der GST, any change in ser­vice tax rate at this stage, though tem­po­rary, would have war­ranted cor­re­spond­ing changes in the billing sys­tems, etc. The pro­posal to with­draw the Re­search & De­vel­op­ment Cess (levied at 5% on im­port of tech­nol­ogy into In­dia un­der a for­eign col­lab­o­ra­tion) is a wel­come move, as it cur­rently be­comes an in­cre­men­tal cost even to man­u­fac­tur­ers, who are oth­er­wise able to claim a set-off of ser­vice tax ap­pli­ca­ble on im­port of man­u­fac­tur­ing knowhow. This also puts to rest the un­cer­tainty around whether or not the R&D cess would con­tinue un­der GST. How­ever, the in­dus­try didn’t get lucky on cus­toms cess, which will con­tinue at least un­der the cur­rent regime.

Then there are a few changes in the cus­toms/ ex­cise duty rates to ad­dress the in­verted duty struc­ture, in­cen­tivise in­dige­nous man­u­fac­tur­ing and pro­mote dig­i­tal pay­ments. These in­clude ex­emp­tions/con­ces­sions for minia­turised PoS card read­ers (in­clud­ing parts re­quired for their man­u­fac­ture), parts used in man­u­fac­ture of LED lights or fix­tures, etc. The ba­sic cus­toms duty rate on LNG has also been re­duced from 5% to 2.5%, which was a long­stand­ing de­mand of the in­dus­try.

The ad­vance rul­ing au­thor­ity un­der cus­toms/ ex­cise/ser­vice tax has been shifted to that un­der the I-T Act. Given the sig­nif­i­cant back­log of ad­vance rul­ings un­der in­di­rect taxes, one would hope that the pro­posed tran­si­tion would lead to an ex­pe­di­tious res­o­lu­tion.

Given that we would be tran­si­tion­ing to GST later this year, this may well turn out to be the last bud­get where the fi­nance min­is­ter had the op­por­tu­nity to pro­pose any sig­nif­i­cant/ struc­tural changes in cen­tral in­di­rect taxes. As most of the changes un­der GST will be ini­ti­ated through the GST Coun­cil (which also com­prises the states), it will be in­ter­est­ing to see if the coun­cil will also have a sim­i­lar ‘an­nual day’ to an­nounce changes in the GST laws!

Pro­posal to with­draw the R&D Cess is a wel­come move

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