Suspense on GST rollout hits Delhi government’s budget planning

Indirect taxes such as VAT, entertainment and luxury tax will get merged under the GST. Officials say once GST is implemented, the budget of state government would largely be about welfare proposals and hardly require any tax proposals.

With the rollout of Goods and Services Tax (GST) from April 1, 2017 remaining uncertain, confusion prevails among planners over the budget preparation of Delhi government for the next financial year (2017-18).

Union Finance Minister Arun Jaitley chaired the GST Council meeting last week.(PTI Photo)

Indirect taxes such as VAT, entertainment and luxury tax will get merged under the GST. Officials say once GST is implemented, the budget of state government would largely be about welfare proposals and hardly require any tax proposals.

Officials say even if the GST is rolled out by September 2016---as mandated by the Constitutional amendment---and the state government comes up with a full-fledged budget, the confusion remains about the time for which the taxes will have to be proposed for.

“Tax proposals are highlights of the budget. The prevailing tax rates are often revised. If at all, GST is not rolled out, the state government will have to come up with a full-fledged budget. Preparations are on but certain things need to be clarified,” an official in the Delhi government’s planning department said.

Read: Centre sees delay in GST, sets July as target for rollout instead of April

“For example, we will have to see for how many months the revised tax rates will be in place as the Constitutional amendment mandates the government to implement GST by September this year, unless the Centre brings in further amendments. It was recently clarified by the Union finance minister,” the official added.

The GST implementation is getting delayed as the Centre has been unable to build a consensus with the states on administrative control over the assessee. The GST Council is due to meet next week to iron out the differences.

The budget preparation generally begins in September-October, when the departments are requested to furnish details of expenditure for preparation of revised estimates and expected demand for the next financial year.

The budget preparation actually begins after the revised estimates are tabled in Delhi assembly during the winter session. Revised estimates for the current financial year would be tabled in the two-day winter session convened on January 17-18, officials said.

In the last budget, the AAP government had slashed VAT rates on several items including readymade garments, sweets and namkeen, school bags, footwears, textile fabric, marble and watches costing more than R5,000.

A section of bureaucracy, however, feels preparing budget would not be much of a problem if the government chooses not to tweak tax rates. “However, with municipal polls likely to be held soon after the budget presentation, it seems unlikely,” an official said.