WILL BUDGET MAKE CHANGES IN GST LAWS

[Dr. Sanjiv Agarwal]

Union Budget 2018-19 is just a fortnight away from now and there is one school of thought which say that Budget will not contain GST proposals.

My understanding is that it will contain GST proposals too, if needed. There is no legal or constitutional bar which prevents Union Government to not have GST proposals in Budget. If Budget (Finance Bill) can have proposals for amendment to Customs, Excise, Service Tax, CST or Income Tax provisions, GST is no different.

Any change to GST laws (CGST / UTGST / IGST Acts) and Sate Compensation law has to be passed by the Parliament which alone is empowered to legislate. The only pre-requisite for GST is that GST Council has to recommend such changes. It is important that next week's meeting of GST Council on 18 January, 2018 is going to be crucial which may recommend certain changes to GST laws.

If grapevine is to be believed, there could be proposals on inclusion of real estate, natural gas etc in GST, making compliances and returns related provisions simpler, streamlining of input tax credit etc. Certain definition for supply, input services etc may undergo a change. Charging section may also be tinkered with for reverse charge provisions and e-commerce transactions.

So far as GST rates are concerned, the case is ripe for a three-tier tax rates by merging the two rates of 12% or 18%. It could be 12% or 18% or both rates could be converged into a common tax rate of, say, 15 percent. While a rate of 15% may be welcomed by service providers in general which would imply going back to Service Tax times as far as tax rate in concerned but a well planned balancing act would be needed in case of goods.

However, Government and the GST Council should also decide not to tweak tax rates off and on but may fix a fixed date (may be once in a quarter) when any such tax rate change be attempted to in future. This would only add to efficient compliances. Compensation cess also needs to be rationalized for motor vehicles and used goods / vehicles in particular.

We should not forget that GST law is going to enjoy status of work-in-progress for few years. All eyes are now on 18^th January when country looks keenly to GST Council meeting which may be a trailer before main Budget. Elections or no elections, it is hoped that collective wisdom would look at country's economic interests and also balance the ease of doing business. It's not time to play politics for now. We had it enough.