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How will GST affect Budget 2018?

The Goods & Services Tax (GST), the biggest tax reform independent India has seen, was unrolled with an aim to be the game-changer for the economy. But the promise of bringing the entire country under one tax regime in a single swoop has been quite a task. No wonder, the economy has had a few hiccups this fiscal year, which will be reflected in this year’s budget. So, let’s see how GST can have an impact on the last budget before the country gears up for national elections next year:
The GST collections are yet to meet the expectations set by the government. In fact, the collections are declining. Although, the first few months of GST collections were sprightly, the numbers have been in a freefall since November. The January collection is also expected to be muted, but analysts reckon that it will stabilise over the medium-term.
So, if you look at it from Budget 2018’s point of view, the government revenues will surely be dented to a certain extent. This means the last full budget before national elections may not be as people-friendly as most people expect it to be. The government will have little legroom to divert money in that case.
Fiscal deficit
Low GST collections will have an impact on the country’s fiscal deficit too. The government, for long, has wanted to achieve its fiscal deficit target of 3.2%, but a loss in revenues may hobble all efforts. Such a scenario can result in spending cuts too. That’s because the government may try to rein in its spending in order to meet their fiscal deficit target.
State governments abolished many taxes post the implementation of the GST. Therefore, the central government compensates all state governments for the revenue loss. Therefore, the GST collections do matter a lot. This is why the government could hike the cess on certain items or impose a new cess in the budget to meet its revenue shortfall.
To sum up
This year’s budget may show GST in poor light, but most analysts reckon that the problems will be overcome over the medium-term. However, this year’s budget may be a party pooper for people who are expecting the moon.