The Union budget is set to get thinner once the Goods and Services Tax (GST), a vital indirect tax reforms that aims to develop a common domestic market and cut out multiple levies, rolls out in the months ahead.

Experts say Part B of the budget, which is the most awaited section, will in all probability sport a very trimmed look after GST becomes a reality.

And, after the announcement of Direct Tax Code (DTC), length of the budget will be further trimmed, prompting the government to focus on policy announcements and detail outcomes of various proposals. The changes on account of GST are expected to reflect from the 2018-19 budget.

“Part two of the budget where you have the tax rates will be reduced by more than 50% and you will only have direct tax rates,” said Dhirendra Swarup, a former expenditure secretary.

“I don’t know in what form DTC will come. And the GST rate will be recommended by the GST Council which will be then be fixed by Parliament because under the Constitution, only Parliament has the power to decide on taxation,” he said.

He said the GST rate maybe fixed for two or three years and it may just be mentioned in the budget. “There will be no need to specify individual rates for small items and therefore the part 2 of the budget will be reduced,” said Swarup.

“The relevance of the budget will not go but degree of secrecy may come down as the recommendations of the council on rates will be in the public domain,” said C M Vasudev, former economic affairs secretary.

He said power on taxation rests with Parliament and the part two of the budget will still have to specify the products and services which will fall under the standard rate, merit and demerits rates. The budget is undergoing a transformation with the government deciding to merge the practice of separate plan and non-plan expenditures. In addition, there is move underway to merge the Railway budget with the general budget.

The reduced emphasis on individual rates on the indirect taxes front augurs well as the government may shift its focus to policies.

“In an emerging market it is more important to focus on policy. Individual tinkering of tax rates should be minimized and with GST, the domestic indirect tax rates will be streamlined. Direct tax rates are already streamlined and they are not changed every year,” said Rathin Roy, director at the National Institute of Public Finance and Policy.

 

Source:http://timesofindia.indiatimes.com/business/india-business/Budget-to-get-slimmer-after-GST-rollout/articleshow/53763017.cms

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