The increase in the rate of service tax is to prepare assessees for a higher rate under the GST regime where both the Central and the state governments would tax the services
There were expectations that this Budget would be an eventful one in terms of reforming the tax regime and providing relief to taxpayers, which has been met to some extent. From an indirect tax perspective, the Budget was on expected lines. The industry was expecting the government to make key announcements regarding implementation of Goods and Services Tax (GST) and the indirect tax regime. The FM lived up to the expectations in relation to changes in indirect taxes, but did not give the desired comfort on the GST front.
The industry was eagerly awaiting a clear roadmap on GST implementation, which was missing from this Budget like in several previous Budgets. The FM, however, laid a constant emphasis on the fact that GST is slated for implementation from April 1, 2016. We will have to wait and see how the government takes this initiative forward. As a step towards GST, the Budget, as expected, announced a marginal increase in the rate of service tax from 12.36% to 14% and also proposed to widen the tax base by pruning the negative list of services and the exemption to various services. The increase in the rate of service tax is to prepare assessees for a higher rate under the GST regime where both the Central and the state governments would tax the services.
The manufacturing sector was anticipating incentives and removal of anomalies in line of the ‘Make in India’ campaign of the Prime Minister. The focus in this regard has been on rationalisation of duties in relation to infrastructure, health, energy and IT sectors. Reduction in excise duty rates was proposed for various components used to manufacture integrated circuit modules for smart cards, LED drivers and MCPCB for LED lights, inputs used to manufacture wind operated electricity generators and solar PV cells.
The FM sought to address the problem of inverted duty structure in a few sectors by reducing the basic customs duties on certain essential inputs/raw-materials.
Full exemption from BCD, CVD and SAD has been provided to parts, components and accessories used to manufacture tablet computers and their sub-parts keeping view the focus on the IT sector.
Keeping in view the moto of ‘minimum government and maximum governance’, this Budget proposed quite a few measures on facilitating compliance and easing administration. The facility of online registration under excise and service tax in two days shall give a major relief to new start-ups and shall encourage compliance. The acceptance of digitally-signed invoices and electronic records under law will also go a long way in making a paperless compliance regime and will also facilitate the ease of doing business in India.
By R Muralidharan, Senior Director, Deloitte in India