News Update

GST Council extends last date for migrated taxpayers to surrender registration upto March 31, 2018 + reduces penalty for late filing of GSTRs + decides to amend e-Way Bill rulesGST Council reduces tax rate from 28% to 18% on used motor vehicles + from 18% to 12% on sugar boiled confectionary, drinking water packed in 20 litre bottles, bio-diesel and bio-pesticides + from 18% to 5% on components required for satellite launch + LPG supplied for domestic consumption + from 12% to 5% on velvet fabric + from 3% to 0.25% on diamonds & precious stonesGST Council decides to exempt RTI-related services + reduces rate on construction of metro projects to 12% + 5% without ITC on housekeeping service through ECO + 5% rate on tailoring service + 18% rate now on entry ticket to water parks or theme parksGST on Services - ITC allowed to tour operators in same line of business + hikes exemption limit to Rs 7500 per month for Resident Welfare Members + exempts legal services provided to Governments & Govt entities + Rate reduced on transportation of petroleum products to 5% + Rate on job work services to leather and footwear reduced to 5% + exempts transport service provided to educational institutionsGST Council shifts focus on anti-evasion measures; Tax rates reduced on 29 goods & 53 ServicesGST Council decides to divide Rs 35000 Crore IGST collections between Centre & States, provisionally17 lakh Composition taxpayers paid only about Rs 307 Crore; Council expresses disappointmentLegislative changes - Council receives demand to introduce Sec 9(4) only for Composition taxpayersGST Council accepts Fitment Committee recommendations to reduce rates on 29 goods + 53 services; New rates to come into force from Jan 25GST Council accepts Sarna Committee report on handicraft items; Fitment Committee to decide tariff for 40 such itemsGST Council finally decides to stop at uploading of Sale Invoices in GSTR-3B till alternative is worked out and approved at next meeting through video conferencing + e-Way Bill - 15 States to roll out intra-State system on Feb 1, 2018SC terms States’ ban on Padmavat illegal after certification by Central BoardFinancial Year should roll out on Jan 1 rather than on April 1: Sushil ModiHyderabad DRI seizes Saudi & Omni Riyals worth Rs 1 Crore from pax heading for DubaiBihar CM wants Jaitley to hike Sec 80C limit to Sec 2 lakh + general exemption limit to Rs 3 lakhCentre to release Rs 1000 Cr more to AP Govt for its Amaravati projectTripura to go to polls on Feb 18; Nagaland + Meghalaya on Fe 27: Election CommissionGST Council is quite sensitive to exporters' problems, says Vice PresidentJaitley holds Pre-Budget talks with State FMs before Council MeetCBEC carries out more amendments in AEO ProgrammeSC declines to entertain petition seeking stay on media coverage of Apex Court Judges's rowADD on Metronidazole imported from PR China - Notfn 40/2012 rescinded - refund to be granted to importers who paid ADD on or after 29.08.2017 but did not pass on burden - Delhi HC in Aarti Drugs 2017-TIOL-1775-HC-DEL-Cus refersRebooting of GST - A TIOL word of caution for the CouncilST - Petitioner cannot challenge one part of order-in-original before High Court and another portion before CESTAT: HCI-T - Fees charged by trade regulatory body for registration of domain names are not taxable as 'commercial receipts': HCCX - CENVAT credit is admissible to extent insurance cover relates to employees for whom it is mandatory to provide such cover: CESTATI-T - Fees paid by cellular companies for acquring 3G band license, if capitalized as 'intangible asset', will be eligible for depreciation: ITATGST for 'Outdoor catering' should be reduced; No GST to be levied on Sale of Motorcars to employees after useGovt streamlines hotel classification guidelinesGovt hikes retirement age of Ayush doctors & civilian docs of Armed Forces to 65Direct tax collections peak at Rs 6.9 lakh cr after refund of Rs 1.2 lakh cr
 
FM faces rare challenge in crafting Budget amidst heightened uncertainty

JANUARY 27, 2017

By TIOL Edit Team

THE Union Budget for 2017-18 might well go down in the history as one prepared amidst unprecedented uncertainty. And uncertainty can alter or even mar the planned outcome of the Budget, which is expected to be presented on 1st February. This situation would make Finance Minister Arun Jaitley's task far more challenging than one faced in the normal years.

The six major factors driving uncertainty are: 1) multifarious effects of demonetisation on economy; 2) impact of unfolding Trump Economics including prospects of further hike in interest rates by US Federal Reserve on India and global economy; 3) further postponement of GST roll-out from 1 April to likely 1 July 2017; 4) merger of Railways Budget into Union budget; 5) projected rise in global prices of industrial commodities in 2017 and 6) advancement of budget presentation by a month.

All economists except the ones in the Government agree on one conclusion-demonetization has created uncertainty, whose impact over the medium and long-term is difficult to determine. Many including international entities have scaled down growth projections for India for current fiscal and the coming one 2017-18.

The latest to do so is International Monetary Fund (IMF).

In its Update of the World Economic Outlook (WEO) released on 16th January 2017, IMF says: "In India, the growth forecast for the current (2016–17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative."

Mr. Jaitley is thus expected to unveil a slew of initiatives to offset the adverse impact of demonetization on the economic growth, investment climate for both domestic and foreign investors, enhanced risks of loan defaults, dented state revenue collections and central revenue receipts that are partly shared with States, battered cash-intensive small and tiny enterprises including street vendors and daily labourers.

FM has to thus plan an optimal blend enhanced public sector investments that help attract private investments and create jobs with diverse tax & non-tax sops to perk up economic activities across the value chains. Reversing the trend of slow-down in export growth is yet another objective that FM has to fit in his scheme of ideas.

He also has mull over innovative ways to ease the hardship of daily wage earners, fledging micro-enterprises, farmers and other sections of the society that bore the maximum brunt of cash crisis caused by demonetisation.

And while pitching for inclusive growth-promoting budget, Mr. Jaitley has to keep an eye on fiscal and revenue deficits, both of which have to be kept within the targets mentioned in medium-term flexibility. He might like to be flexible on these numbers, assuming N.K. Singh Committee on review of Fiscal Responsibility and Budget Management (FRBM) Act & FRBM road-map has recommended fixing deficits as a range instead of rigid fixed numbers.

He would also have to factor in lurking fear of return of global inflation and its spillover effect on Indian economy, which is heavily dependent on imported crude oil, liquefied natural gas and coal.

In its latest quarterly Commodity Markets Outlook (CMO) report released on 24th January 2017, The World Bank foresees crude oil prices rising to USD 55 per barrel in 2017 from USD 43/bbl in 2016 following agreements among some Organization of the Petroleum Exporting Countries (OPEC) producers and non-OPEC producers to limit output in the first half of 2017.

Energy prices rose 11 percent in the fourth quarter of 2016 from the previous quarter with strong gains in all fuels. Coal prices soared 38 percent on strong demand and continued supply tightness in China resulting from government efforts to reduce coal capacity. Natural gas prices rose 8 percent, says the report.

Such trends, if they gain momentum, can not only stoke price spiral in economy but also force FM to revisit the taxes especially the periodic hikes in excise duty on petroleum products made in 2014-15 & 2015-16.

The prospects for mid-course interventions by Finance Ministry due to global factors would also be determined by spillover impact of economic changes in the US under Presidentship of Donald Trump.

If the forthcoming budget translates into economic growth of 7.5-8.0% with inflation of 3-4% in 2017-18, then Mr. Jaitley would be credited with achieving a herculean task.


POST YOUR COMMENTS