Widening fiscal deficit, gloomy economic outlook, and sluggish gross domestic product (GDP) growth left no choice with the central government, other than to increase tax burden on the common man.
However, this new alternative will clear the road for the implementation of the most awaiting Goods and Services Tax (GST) regime and hopefully increased Central Government revenue will tempt the states who are opposing GST on narrow political grounds to fall in line.
The proposal has already been sent to the cabinet for discussion. Sources close to the finance ministry have said that budget may unveil a 'negative list' of services, including the only services which will not be subject to service tax, while the rest will fall under the jurisdiction.
The government plans to define service as "anything that does not constitute the supply of goods, money or immovable property." Therefore, every transaction other than the sale of goods or money will be treated a service.
Currently, only 107 specified services fall under the tax bracket and the rest are kept outside the ambit of service tax. With passing of the proposal this budget, all the services which will be consumed by the customers come under the existing rate of 10.3 percent.
The new service tax regime is expected to generate around Rs 20,000 crore of additional revenue for the government, aiding in reducing the fiscal deficit.
Apart from India, this tax regime is already prevent in most part of the world including Europe, UK, countries in South America, Canada, New Zealand, Singapore, and many more.
As union budget is just two days away, let's see up to what extent government bring shift in the tax regime and how aam admi accept it!