BUSINESS

Govt May Cut Taxes To Spur Consumption, But Lack Of Indirect Tax Data Could Make It Difficult

Welfare spending proposals are usually based on projections of direct and indirect tax collections in the fiscal.

26/01/2017 5:20 PM IST | Updated 26/01/2017 5:23 PM IST
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NEW DELHI -- Battling slump in demand after shock demonetisation, Finance Minister Arun Jaitley may look to spur consumption through lower taxes in next week's Budget, but he faces a peculiar situation as precise projections of indirect tax collection in 2017-18 are unavailable due to GST.

Finance Ministers usually weave around their welfare spending proposals based on projections of direct and indirect tax collections in the fiscal.

Projections of collection in direct taxes, made up of personal and corporate tax, would be available but with the rollout of Goods and Services Tax (GST) deferred till July 1, no reliable projection of indirect tax collection for 2017-18 fiscal is likely to be available, tax experts said.

Indirect taxes have three major components -- customs, central excise and services tax. While a projections of customs revenue would be available, the same for excise and service tax may not be present as the same are to be subsumed in GST.

The GST is also to subsume state VAT.

And typically the Centre would account for roughly half of the total nationwide GST revenues after excise, service tax and VAT are subsumed and weave around its budget.

But this year is peculiar, experts say. "No reliable projection of the GST revenue is available because the GST Council is yet to decide which product or service will be taxed at what rate. In absence of that one cannot have a reliable projection of GST revenue collection," a tax expert said.

VAT data of states cannot be taken to calculate the total GST revenue because the rate of taxation for different products may change under GST and also that the data with states is not always very reliable, he said.

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