NEW DELHI: The Union Budget 2018 holds special significance being the first budget to be presented in the post-GST era. Quite naturally, the winds of change brought by the new tax regime will affect the annual affair too. The most evident change is expected to take place in the way the finance minister , in his budget speech, details about the tax structure.
What is the existing norm
The Union Budget is bifurcated into two parts- Part A and Part B. The first part deals with broad outlays of money for different sectors and the introduction of new schemes. The priorities and focus areas of the government are indicated from this part. The Part B on the other hand deals with taxation proposals – both direct and indirect. Direct tax includes taxes like the income tax, corporate tax etc while indirect tax, in the pre-GST era, used to include a host of taxes like service tax, excise duty, value added tax (VAT), octroi etc.
How does it change under GST
The GST roll out on July 1 subsumed more than a dozen of taxes that previously featured under the indirect tax column. The customs duty remains the only indirect tax that is not under the ambit of GST. Thus, finance minister Arun Jaitley will likely not be able to tweak any of these, since they simply cease to exist anymore.
Why is it significant
The share of direct and indirect taxes in the last year’s budget was almost equal. This year’s budget will mean that the finance minister will likely not be able to manouvre with the indirect taxes and thus miss out on the opportunity to score brownie points by offering sops or reliefs on this front.
In the last year’s budget estimate, service tax accounted for 14.2 per cent of the total indirect tax collection, and was expected to fetch more revenue than customs duty for the government. The service tax collection has in fact, surged a whopping 239 times in the last 20 years. As mentioned above, the service tax too, has been subsumed under GST. Most of the services are taxed under the 12 and 18 per cent slabs, as compared to the erstwhile flat slab of 15 per cent.
Moreover, indirect taxes also included a slew of cesses including a few like education and Krishi Kalyan cess which were super taxes – taxes that are to be paid with every other tax. Each of these cesses apart from that on petroleum products is subsumed under GST.