The indirect tax structure has undergone a complete transformation with the roll out of the Goods and Services Tax in July 2017.

Multiplicity of taxes and too many tax-levying authorities were the factors impeding the ease of doing business in the country. Revenue leakages due to tax evasion, lack of transparency and cascading taxes, were the other ills that plagued the previous indirect tax regime. The Goods and Services Tax was expected to bring uniformity in indirect tax law, with a single authority levying the tax, thus improving the environment for businesses.

The changeover took 10 years, involving multiple high-powered committees, and an army of tax department officials. While the GST was first announced in 2006, and the first discussion paper released in 2009, it was only in August 2016 that the Constitution Amendment Bill was passed. In March 2017, the CGST, SGST, UTGST, IGST and Compensation Cess Bills were recommended.

The passage of the Bill and approval of five laws in 2017 finally paved the way for subsuming various Central taxes, including the Central Excise Duty, Service Tax, Surcharge and Cesses and State Taxes, such as State VAT/ Sales Tax and Central Sales and Purchase Tax, into the GST.

This historic change will have a dramatic effect on the structure of the Budget as well. With the GST absorbing many of the indirect taxes levied by the Centre as well as the States, the Finance Minister is likely to focus on customs duty, the major indirect tax, which is still outside of the GST. Tax experts expect some tweaks to the existing customs duty rules. "Education Cess & Secondary Higher Education Cess payable as per custom law may be exempted or subsumed by merging the cesses into Basic Custom Duty," says Rakesh Nangia, Managing Partner, Nangia & Co LLP.

Some clarity in the valuation of imported goods in transfer pricing is also required, said Nangia. "Customs valuation for imported goods and Transfer Pricing under Income Tax laws are based on arm’s length principle.

However, authorities of Customs & Income Tax Law try to inflate/deflate the valuation for their own end-result. A Guidance may be provided in this regard."

Tax experts also suggest a dispute resolution/amnesty scheme for all tax payees, who were under the Central and State laws, which have been merged into GST.

Shrikant Kamat, Leader/ Customs and International Trade, Partner/ Indirect Tax, BDO India, thinks there could be some changes in the customs duty on certain items.

He expects customs duty to be increased for mobilephone parts and other specified goods and equipment, to incentivise the ’Make in India’ initiative. "Customs duty on certain farm sector products are also likely to be reduced, given the general uptick in demand and lower production of those goods in India," he says.

Kamat also thinks that few more trade facilitation initiatives are likely to be announced to ease the movement of goods from/to the port/ICDs, and also to encourage transit trade to Nepal, Bhutan, Myanmar and Bangladesh.

Part B of the Budget is likely to be truncated this year since most of the erstwhile indirect tax legislations have been subsumed under GST.

However, the decrease in GST collections over the past few months, is likely to result in the following measures in the Budget: "Many taxpayers are not able file their returns due to technical glitches & invoice-level matching. Invoice level-matching may be done away with to expedite the return-filing process.

The returns for composition dealers may further be simplified; payment of tax may be allowed at all times instead allowing it only at the time of return filing.

Technical glitches on the date of filing the returns results in delay in payment of tax leading to late payment and consequent levy of interest and late fee," said Nangia.

Many in the industry want a mechanism for the revision of GST returns filed for the previous months to be prescribed, detailed procedure anti-profiteering compliance provisions to be spelled out, and an amnesty scheme for self-declaration of excess credit taken under transitional provisions, with waiver of penaltyto be announced.

 25 Jan 2018, 02:30 PM