The Hon’ble Finance Minister Smt. Nirmala Sitharaman is days away from announcing the Union Budget 2022-23. The Finance Ministry, just as usual, has asked the industry for recommendations to incorporate in the budget, wherever possible. Union Budget in India is always eagerly awaited by the taxpayers with their hopes attached for easier compliances. Whether it may be Indirect tax or Direct tax, the entire country listens to the budget speech with much enthusiasm.
Since the time GST got introduced, the Union Budget has been less of an event for indirect taxes as the GST Council takes most decisions throughout the year. Therefore, amendments in the GST law are on a continuous basis throughout the year at the time of GST Council meetings. Due to this reason, the Finance Ministry, while asking for recommendations this year, excluded GST matters as they are decided by GST Council.
However, the following limited discussions are anticipated in the Union Budget 2022 from the perspective of GST:
- Rate Rationalization: Since the inception of GST, rate rationalization has been discussed. The current four rate structure of GST is expected to convert into a three-rate slab and subsequently maybe into a dual rate slab. This may be done by the withdrawal of major exemptions. Rate rationalization is imperative to resolve the issue of inverted duty structure faced by various industries currently. Thus, rate rationalization will streamline the rates under GST and correct the problem of inverted duty structure, both at once.
- Compliance reduction: The MSME sector has been representing before the Government to reduce the GST Compliances. As a result, QRMP scheme was announced previously. Additionally, relaxations were given to small taxpayers for filing GSTR 9 and GSTR 9C for FY 2020-21. However, recently, the ITC restrictions have been tightened with the introduction of Section 16(2)(aa) of the CGST Act, 2017. Moreover, the adherence to GSTR 2B for claiming ITC will now create issues for the industry.
- In its pre-budget memorandum ahead of the Union Budget, the Institute of Chartered Accountants of India (ICAI) has made the recommendations to reinstate the audit and certification of the reconciliation statement (GSTR-9C) by the Chartered Accountants instead of self-certification by the management.
- Inclusion of petrol in GST: Though the nation has been rooting for the inclusion of petrol and diesel in the GTS regime to bring price stability and reduce the fuel cost, the finance minister in the recent past has made it clear that this decision may not come soon. However, a discussion on the same or an expected timeline to include the same in GST could be discussed.
- Extension of compensation cess: The life of compensation cess ends in June 2022. However, in the pre-budget meeting, the states have requested the finance minister to continue the compensation cess in view of the pandemic. Therefore, one important announcement during the budget could be to provide for an extension of compensation cess by another one year or six months.
While the above are couple of expectations from the budget, trend shows that the key decisions in respect of GST is taken only during GST Council. Nonetheless, it may not be ruled out that the Ministry of Finance may have some surprises in their bags for the GST regime specifically with sectoral impact. With the third wave of Covid sweeping in, the Government may announce certain compliance relaxations or stimulus to affected industries like hospitality, aviation, etc.
Whether Union Budget 2022 will be a sweet pill or a sour medicine – only time will tell!