Govt may have little manoeuvring room in Budget 2019 - thanks to GST

  • 29-Jan-2019
  • Govt may have little manoeuvring room in Budget 2019 - thanks to GST

Four days to go before Interim Finance Minister Piyush Goyal takes to the podium to present the Union Budget 2019, the second one post the implementation of the Goods and Services Tax (GST). With the new tax regime swallowing up more than a dozen indirect taxes, including sundry cesses, the Budget speech is unlikely to pack any surprises. After all, it used to be the announcement of indirect tax proposals that used to directly impact the common man's wallet by making things costlier or cheaper depending on the government's policy for the year.

Any decision related to changes in the GST rates is now taken by the GST Council, so basically only proposals for changes in direct taxes - both personal income tax and corporate tax - and customs duty, and any declarations of policy changes or new government schemes/programmes remain to be presented in the Budget.

That leaves the government with precious little manoeuvring room in the Budget 2019. "Customs duty can be changed for some products if warranted and other central excise rates could be tinkered with. But on direct taxes, giving anything may be improper and taking more through cess or enhanced rates would be vote losing. Therefore, a neutral stance on taxes may be expected," Madan Sabnavis, Chief Economist, CARE Ratings, told Firstpost.

For instance, complete exemption from customs duty on life saving drugs and medical devices has been a long-standing demand of the healthcare industry while FICCI has recommended cuts on excise duty on compressed natural gas (CNG) to promote usage of this environmentally-friendly fuel in domestic and commercial transportation sectors.

On the other hand, the Consumer Electronics and Appliances Manufacturers Association (CEAMA) on Friday urged the government to raise customs duties on imported finished goods, such as TVs, air-conditioners and refrigerators, while lowering the same on components in order to promote domestic manufacturing. The upcoming budget may address such demands, and that could impact prices of related products as companies pass on the buck to consumers. Of course, the Finance Minister could also choose to tinker with tax rates of the items that are not yet in the GST net, like alcohol and fuel.

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