For more updates follow Grant Thornton Bharat on WhatsApp
Budget Expectations: The upcoming Union Budget by NDA 3.0 is highly anticipated for its economic and social welfare policies to rejuvenate India. The budget is expected to focus on infrastructure, healthcare, education, job creation, and tax reliefs. Indirect taxation, including GST, will be a key area of scrutiny, with potential adjustments to customs duties and the introduction of production-linked incentive schemes. The industry eagerly awaits measures to streamline compliance processes, boost revenue, and support the Make in India initiative.
Budget Announcements: As the newly formed central government prepares to unveil the Union Budget, there is growing anticipation for policies aimed at economic rejuvenation and social welfare. NDA 3.0 is tasked with shaping the future of the world's most populous and youthful democracy.
Indirect Taxation and the Budget: Among the various facets of economic policy that will be scrutinized, indirect taxation stands out as a critical area. Indirect taxation, notably the Goods and Services Tax (GST), customs duties, and excise duties, plays a pivotal role in economic policy scrutiny. Despite initial challenges, GST has stabilized, boosting tax collection and compliance. However, criticism persists due to its complexity, frequent rate changes and burdensome compliance. Budget 2024 is expected to address these challenges, focusing on streamlining compliance related processes and boosting revenue.
Budget Expectations and GST Council Meeting Insights: Recently, the 53rd GST Council meeting was held, during which several trade-friendly measures were recommended including conditional GST exemption on hostel/ guest house accommodations for students and working professionals, relaxation on delayed availment of ITC, facility to revise returns and waiver of interest/ penalty on demand notices. Various amendments in the GST law are expected to give effect to the recommendations made by the GST Council in the meeting.
Despite the Hon’ble Finance Minister announcing several significant measures in the much-anticipated GST Council meeting, the industry anticipates more. While any new GST amendment can only see light of the day once it has been discussed in the GST Council's meetings, the Hon’ble Minister can certainly indicate some key focus areas in her upcoming budget speech.
Discussions are expected around online gaming industry, rate rationalization measures under GST, lower GST rate on life insurance products, phased implementation of GST on petroleum products and relaxation of blocked credit provisions by excluding various expenses from its ambit which are necessarily incurred in the course and furtherance of business. Additionally, the industry expects the government to expedite the process of operationalizing the GST Appellate Tribunal and a centralized body that is, the National Appellate Authority for Advance Ruling, to resolve discrepancies, ensure uniform rulings nationwide, and reduce writ petitions in High Courts.
Customs Duty Adjustments in the Budget: On the customs front, to bolster the ‘Make in India’ initiative, Budget 2024 may introduce adjustments to customs duties on imported goods and raw materials. By reducing import duties on raw materials and intermediates while increasing them on finished products, the government aims to boost local production. Industry associations have also proposed a three-tier import duty system: lower rates on raw materials, moderate rates on intermediate goods, higher rates on finished products.
To settle long-standing disputes and modernize the law, the industry eagerly awaits announcement of an Amnesty Scheme for Customs and the digitization of the Customs litigation process. Additionally, an efficient online refund system for customs would ensure timely repayments, improved cash flows.
Manufacturing in Customs Bonded Warehouses popularly known as MOOWR scheme, a key Government initiative to support the manufacturers, had its GST duty deferment benefits removed in Budget 2023. The industry requests maintaining the current provisions to support the Make in India initiative.
Production-Linked Incentive (PLI) Schemes in the Budget: The upcoming Union Budget is also likely to introduce production-linked incentive (PLI) schemes for industries including agrochemical industry, gems and jewellery, toys, footwear, leather and other sectors beneficial for MSMEs. Extending it to such sectors could boost employment and further bolster India’s manufacturing capabilities. Additionally, for the continuous growth of the EV industry, the industry players have suggested GST rate concessions for electric vehicles, lithium-ion batteries, EV spare parts and components.
Budget 2024: A Milestone in Indirect Tax Journey: Budget 2024 promises to be a significant milestone in India's indirect tax journey. As businesses and consumers brace for the upcoming changes, the emphasis on creating a balanced and efficient tax system remains paramount. The heightened anticipation for the Union Budget 2024-25 underscores its capacity to profoundly influence India's economic trajectory.
This article first appeared in The Economic Times on 13 Jul 2024.
