The Revenue Jigsaw

The many unresolved issues in the Goods and Services Tax (GST) have thrown the government’s forthcoming Budget projections out of gear.

- Dipak Mondal

It is official now. The April 1 roll-out of GST is off the cards, and it is likely to be deferred to July 1 this year. Besides, there are uncertainties regarding the final shape of GST. Amid such apprehensions, the estimates of total tax collection – especially those of indirect tax – in the Budget may go off target by a fair margin.

It’s not to say that revenue projections in Budgets are never off target – almost every year, the estimates are revised – but for the next financial year, the tax collection estimates would be clouded by ‘unprecedented’ events like GST and demonetisation, the former being the biggest disruptor.

The GST Cloud

GST is a complete overhaul of the indirect tax system that will not only change the rates at which many of the goods and services are being taxed now, but also lead to more individuals coming into the tax net. However, this piece of legislation has been hurried through to meet the deadlines without addressing many of the open issues. The April 1 rollout would have made Budget preparations easier as most of the indirect tax proposals would have been taken care of by the GST Council – a body comprising states and Central finance ministers that takes important decisions such as fixing rates on GST.

However, last minute negotiations and hard bargains by various states have delayed the implementation (by at least a quarter). Even as the government is trying to hurtle past the finishing line, unresolved issues continue to linger.

“How do you make any kind of estimates when you do not even know when the GST would be implemented,” asks Madan Sabnavis, Chief Economist, CARE Rating.