Reeling under an insufficient budgetary allocation for modernisation, the military has a new financial challenge: the Goods and Services Tax. A recent report of the Parliamentary Standing Committee on Defence says the tax will result in an additional burden of ₹5,000 crore on the Army alone.
“The additional burden is due to new taxation laws in the GST, which has come into force in the past one year and has not been taken care of in the new Budget,” the Army informed the committee.
The Army told the panel that the capital allocation did not even cater to the payments for committed liabilities, or deals already contracted for.
The Indian Air Force, which is heavily dependent on imports, is facing a similar situation.
The IAF informed the committee that in 2016-17, it paid a custom duty of ₹943,62 crore, which went up to ₹1,614.28 crore in 2017-18.
“This amount was not even reimbursed to the Air Force. The estimated outgo for 2018-19 is ₹1,726.98 crore,” the committee was informed.
The funds allocated for committed liabilities is ₹33,100 crore against a projection of ₹72,482 crore.
The Navy too is affected by the new tax regime, though to a less extent than the Army and the IAF.
The Navy apprised the committee that in the revenue part, the tax burden due to the GST will go up from ₹427.28 crore last year to ₹800 crore this year.
“The committee, therefore, desire that reasonability be shown in the budget for the Army, by way of providing for the additional burden to the extent of ₹5,000 crore due to the changes in the taxation laws,” the panel said in its observations in the report tabled in the Parliament last week.
On the IAF’s deposition, the committee suggested that the Defence Ministry make appropriate allocation to address the issues of taxation in the Budget, keeping in mind the additional burden levied on the service.
