The goods and services tax (GST), implemented on July 1, last year, has radically changed many things in the Indian economy. A change that has not been noticed by anybody has its effect on the budget 2018.
GST has reduced the budget of its suspense and mystery by taking away half of its work, the indirect taxes.
Now the GST Council decides the tax rates for goods and services. In fact, Finance Minister Arun Jaitley had dropped the indirect tax proposals in his previous Budget in anticipation of GST coming in force after a few months. The Union Budget has two parts — Part A contains allocations to different sectors and schemes, while Part B contains tax proposals, both direct and indirect.
The tweaks and sops announced under various indirect tax heads and were periodically sensitive and kept secret till the presentation of the budget. These changes were effective immediately, based on these changes, companies decided on the prices of different goods and services.
Since the implementation of the Goods and Service Tax (GST), more than 12 different taxes including VAT, Excise Duty got subsumed, hence, leaving no place for the Budget under the heads of indirect tax. Any decision on indirect tax on goods and services is now taken by the GST Council.
However, the direct tax is still under the Union budget, and in that area, Arun Jaitley may choose to make some changes. Bringing the corporate tax rate from 30% to 25% is a long-standing demand, and it may be mentioned in the upcoming budget.
In the budget of last year, 2017, in the hope of being implemented from July of GST, Arun Jaitley did not make any significant changes in indirect taxes. The government levied a special additional duty of 2% on imports of populated circuit boards used in the manufacture of mobile phones, which led to a slight increase in the price of the phone. Similarly, the excise duty on unmanufactured tobacco doubled from 4.2% to about 8.3%, making cigarettes, BIDs and tobacco products expensive. Implementation of GST has covered the entire process of the central budget.
Although the budget of 2018 is expected to be the incentive for the rural population and the farmers, the framework for infrastructure investment and employment generation. Budget 2018 is the last full budget of the present government and is the last one before the elections of eight states and the general election of 2019. Experts estimate that this budget should be populist. Arun Jaitley will present the budget on February 1.