New Delhi: International accounting and consulting firm Deloitte expects that the Indian government will increase excise duty and service tax rates in the upcoming Budget. So as to harmonise them with the proposed Goods and Services tax (GST) which is scheduled to be introduced from next fiscal.
The government has cut excise duty rates by six per cent and service tax by two per cent in three stimulus packages, which Deloitte expects to be partially rolled back.
"The government may cut back indirect taxes reductions made as part of fiscal stimulus packages in December and in February, as the Finance Minister is expected to discuss the roll out of GST and lay down a framework plan for the introduction of the tax in the country," said Deloitte Touche Tohmatsu India, Senior Director (Indirect Tax), M S Mani.
Mani said the government is expected to give some directional clarity on the GST and service tax and excise duty rates which can be increased in order to facilitate transition to the proposed GST regime.
GST is supposed to converge almost all indirect taxes at the Centre and states. Broadly, it will replace excise duty, service tax at the Central level and VAT at the state level.
Among other expectation from the Budget, to be presented by Finance Minister Pranab Mukherjee on July 6, Deloitte predicts the custom duty on crude oil may be brought back to bring fresh revenue streams for the Government to rein in mounting fiscal deficit
In its sector-wise expectations, clarity on applicability of service tax/VAT on software industry transaction is likely to be brought by the Government.
"The introduction of the Information Technology Software Services, which has been defined in a fairly expansive manner has resulted in overlapping taxes. It is expected that some of the anomalies would be rectified," Mani said.
For the telecom sector which is a capital goods intensive sector, the removal of the special additional duty payable on import of capital equipment would benefit the sector.
Further, Deloitte expects that a reduction in customs duty on imported equipment required for telecommunication services could be expected in view of the mandate from the telecom minister to further reduce telecom rates.
Among other sectoral expectations, some clarification is expected on applicability of service tax on renting of immovable property in light of the recent Delhi High Court decision.
Besides, the service tax rate under the Composition Scheme for Works Contract services increased to four per cent from two per cent from March 1, 2008 and continues to remain the same although the rate of service tax has reduced from 12 per cent to 10 per cent from February 24, in 2009.
The same needs to be corrected if the service tax rate is expected to continue at 10 per cent, he added.
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