Budget 2018-19: How GST may be impacted

Today’s the day: Indian Finance Minister Arun Jaitley will soon release his final budget — the first in the post-Goods and Services Tax (GST) era. With general elections coming in May 2019, this will not be a full budget, but instead a vote-on-account, which deals only with expenditures for the next year.

What will the budget have in store for GST? Widespread changes are not expected. After all, since the implementation of GST on July 1, 2017, the GST Council has held subsequent meetings to tweak many of the original GST provisions, as well as reduce rates for numerous products.

Still, Jaitley previously stated his intent to address certain GST-related issues and further tweak GST rates. Experts expect him to focus on the following areas.

Compliance ease   

One of the major GST-related decisions that experts expect to see in the new budget is further easing of compliance regulations — specifically the return filing procedure. Forms GSTR-1, GSTR-2, and GSTR-3 are expected to be consolidated into a single return, which will significantly reduce the compliance burden on small and medium taxpayers. Experts also see a need for technological updates to improve the reliability of the current GST system.

Further, many hope the government will consider the hardship that steep penalties bring to taxpayers, and perhaps relax them while the GST system is still settling in. Many noncompliance penalties may very well be mistakes rather than mischief.

Real estate sector 

The real estate sector is expected to be in the limelight in Budget 2018. Indian real estate has been in revival mode, and many experts believe that a budgetary push will boost its recovery.

While a series of reforms, specifically the Real Estate (Regulation and Development) Act (RERA) of 2016 and GST, have given the sector additional reliability and transparency, many experts would like to see the parliament lower the 12 percent GST rate on apartments currently under construction.

The real estate industry has also lobbied in support of affordable housing to be free from GST, and low-cost housing to be taxed at 5 percent. The industry also anticipates the inclusion of stamp duty and thereby an overall rationalisation of GST. 

Other aspects 

Taxpayers and experts will be watching for other potential impacts on GST, such as the following:

• Diesel, natural gas, and gasoline may come under the purview of GST
• Clarity of taxation on e-wallets
  
• Centralised taxpayer registration for banks, insurance companies, and financial institutions
  
• An end to certain restrictions on input tax credit 
  
• User-friendly policies for exports that include a focus on faster refunds from the government — exports decelerated sharply in the post-GST era, contributing to the fiscal deficit
  

Multiple rate consolidation

Most experts argue that there are currently too many different tax rates and that the situation needs to be addressed. However, this issue is not likely to be resolved in the 2018 budget. At most, the finance minister may hint at rate consolidation in the coming years. Further, expansion of the GST base may also have to wait for future discussions.

While expectations for Budget 2018 are high; GST collections have been low. Thus the government may have little legroom to distribute money according to the common people’s expectations.

But there’s little time for further speculation. It’s only a matter of hours before we find out exactly what the budget will reveal with regards to GST.

Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application, Avalara India GST, can help you with GSTR-1 to 9, contact us through https://www1.avalara.com/in/en/products/gst-returns-filing.html.