JOIN USIf the goods and services taxes (GST) were to roll out as planned, Saturday’s may well be the last Budget with an indirect tax section, feels Krupa Venkatesh, senior director and indirect taxes expert at Deloitte. Her reasoning is simple. The GST will fold within it central excise and service tax (Central GST), and the state taxes of entry tax, luxury tax, octroi, CST, and VAT (state GST).
“After that, changes in the rates have to be made by the GST council, and it can happen at any time. Industry representations will henceforth go to the GST Council. I would be very happy if the budget doesn't have frequent changes to indirect taxes. In direct taxes, you could expect maybe some changes.”
She also hopes the budget would do more on reducing the negative list. “A lot of preparatory work for GST has already been done like reducing the negative list. I wish the budget would do more. GST is all about reducing the exemptions.”
“If you have exemptions under the GST, it's like you are cutting the credit chain. That has been taken care of to a large extent by reducing the exemptions in excise, and pruning the negative list in service tax.I am not sure that the FM would want to tinker with the rates because it's very close to the GST. But there is an inverted duty structure for many goods. Notably automobiles.”
She also hopes to see a definite GST road map announcement.
“Today, the question that's in everybody's mind is whether they need to go in for some preparatory work on GST because of uncertainty about when the law will be enacted. At least a road map saying this is when you should expect the legislation, and this is when you should expect the rates to be out, would be welcome. Otherwise it will be very difficult to expect businesses to fall in line by 2016. Industry wants an assurance from the FM that a lot of back-end work has been done and GST is doable. If that happens, I don't think industry wants any other reform.”
Taxability of services
While she thinks there won’t be any changes in the general rates for customs, excise and service tax, she does believe that for people to embrace the ‘Make in India’ concept, Jaitley may make use of tariff and non-tariff barriers.
“Usage of the first is limited because of Asean rates and the ITA agreement. So you will have to bring in some kind of non-tariff barriers.”
Last year, provisions were made to prescribe services rules for determining taxability of certain services such as intermediary, repairs, etc. This has led to some avoidable confusion, she thinks.
“Suppose you are a commission agent and your principal is sitting abroad. Then even if you are getting commission from your principal in forex, it will not be considered export of revenues. Instead, it will be treated as if the service was rendered in India and you would be charged 12.36 per cent service tax.”
“This has become a big point of contention because revenue is extending it to all companies which are providing marketing activities even though they are not agents. But that doesn't seem to be the intention of the amendment as it worded, but in implementation it has become so. So the industry is looking forward to a clarification.”