Union Budget 2017 – In anticipation of GST?

Ranjeet Mahtani and Sweta Rajan

The Union Budget 2017 was announced on February 1, 2017. It was expected that the Budget announcements would have indicated the timelines for GST. However, no indications with regard to timelines were provided. There were also wide expectations that the rate of service tax would be increased from the current 15% (including cesses) to prepare for and align with the proposed rates under the GST regime.

Rather the indirect tax proposals in the Budget were limited, an indication of the imminent transition to GST. Certain rate changes were proposed to address the inverted duty structure prevalent in respect of certain goods to ensure a level playing field for domestic manufacturers in keeping with the goal of ‘Make in India’. The Finance Minister briefly commented on the substantial progress made towards ushering in GST in India.

Post the Budget, the Finance Minister stated that he hopes that the GST Council will clear the draft legislations in the next meeting of the Council on February 18, 2017, and thereafter introduce the legislations in Parliament in the second half of the Budget session. The Revenue Secretary Dr. Hasmukh Adhia issued a statement that as regards GST rates, (i) all cesses will be subsumed under GST except those on petroleum products, and (ii) the classification of goods and services across the 5-tier rate slabs (0%, 5%, 12%, 18% and 28%) will be decided in May-June, 2017 and will be broadly as per present. He also indicated that the draft GST rules will be finalised in March, 2017.