| Date: |
10-02-2015 |
| Subject: |
Budget 2015: Streamlining of Special Additional Duty may pave way for GST |
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NEW DELHI: Finance Minister Arun Jaitley could set the ground for goods and services tax in the forthcoming budget by rolling out measures to facilitate this levy led by rationalisation of special additional duty (SAD) while shifting some products to a higher excise duty bracket. "Some steps have to be taken in line with the GST," said a government official, sharing the likely changes in the budget.
SAD is levied on imports over and above the basic Customs duty in lieu of central sales tax. Though the central sales tax was cut to 2% as part of the GST roadmap, SAD was left untouched. Besides impacting cash flow, SAD pushes up the duty for the manufacturing sector along with countervailing duty to 17 per cent compared with output excise duty of 12 per cent.
The Narendra Modi government is looking to give a big boost to manufacturing sector in the upcoming budget that is being woven around the 'Make in India' theme. Tax experts say there is little logic in continuing with the duty since as it is to be refunded. "SAD is available as a credit to manufacturers and refund to traders. Therefore, a large part of duty collected doesn't really accrue to the government," said Pratik Jain, partner, KPMG.
A final call on the issue will be taken closer to the budget in line with revenue considerations, the official cited earlier said.The government could also look at moving some goods attracting nil or lower rate of excise duty under duty regime to the median rate of 12 per cent in line with the thinking on GST. A number of items such packaged as cheese, yoghurt and butter could attract excise duty.
"Exemptions have to be pruned. There cannot be many exemptions under GST. Besides, a number of items already attract value-added tax in the states," said another official. There may be some giveaways in the form of a reduction in indirect taxes as the government looks to correct the inverted duty structure, making revenue raising measures imperative.
The government could also indicate movement towards place of supply rules for services tax as also rationalise the input credit mechanism that will be crucial to implementation of GST.
"The budget needs to remove the inefficiencies in the system like inverted duty structures to pave the way for an efficient GST," said Bipin Sapra, partner, tax and regulatory services - indirect at EY.
Source : economictimes.indiatimes.com
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