With the National Democratic Alliance (NDA) government back in pole position for the third term in a row, all eyes are now focused on the Union Budget 2024-2025 which will be announced on July 23rd, 2024. With no changes at the helm of the Finance Ministry, work done in the last decade is expected to continue. As always, stakeholders and industry leaders will look forward to policies and measures which are futuristic aims to boost economy and strive for consistent growth.
While there are expected fireworks on the direct tax front, with slab changes, rate cuts and what not, one may say that indirect tax announcements are also expected to bring some cheers.
Taxation plays a vital role in achieving the economic goal of the country, and the industry hopes to welcome policies and measures which further incentivise domestic manufacturing sectors including but not limited to electric vehicle sector (EV), for striving towards "Atmanirbhar Bharat’.
The Budget also sets the tone for the investment policies of the government and budgetary outlays are expected to boost domestic manufacturing.
With the GST Council steering the journey for GST, nothing new is expected to be announced in the budget apart from what we already know, however, there are a few points which the industry may still look forward to.
Changes in Customs Law
Introducing an amnesty scheme under customs law, like those introduced for other tax laws, with the aim of reducing litigation is the need of the hour to reduce litigations. Considering the amnesty in other tax laws have had considerable success, this has been a consistent ask of the industry. This move would considerably reduce the litigation burden on the judiciary as well as augment the government revenue.
Further changes are expected to reduce compliance burden and make customs clearances swifter than before. Some crucial changes expected is the rationalising of import duties to fix duty anomalies. Expected rate changes will be mostly to support the domestic manufacturers and curb tax leakages. It may be noted that in previous budgets, the rates of certain items were increased to boost manufacturing in India, however, as result of this, there was a marked increase in the cost of critical supply chain components.
Investments and Augmentation for the EV and RE Sector
The government’s intention is to promote the usage of electric vehicles in India and the remarkable growth of this industry shows the potential to contribute significantly towards achieving India’s sustainable development goals. GST rate rationalisation on several components including batteries is the key as has been already done for electric vehicles per se. The EV auto industry is eagerly waiting for additional incentives/subsidies to be provided to EV and its component manufacturers. From a renewable energy perspective, it is understood that the industry is requesting for a lower import cost (as also a corresponding GST rate cut) on batteries used for storage, commonly known as BESS.
What to Expect From A GST Perspective
GST on petroleum products has been a contentious issue ever since the debates surrounding the inclusion of the same within the purview of GST has surfaced, one may expect some announcements on these lines. Inclusion of fuel under the GST net requires a strong cooperative federalism framework and the FM may make some inroads through GST compensation arrears and other tax devolutions. The recently announced Section 11A once introduced should provide some reliefs for many sectors and industries such as gaming, insurance, cable operators will be looking at the fine print to see if they can benefit from the same.
A much-needed clarity is expected in the appropriate classification of VDAs, including crypto currencies and NFTs. While the Government had earlier provided clarity as regards their taxation under the Income Tax, the position in GST is still ambiguous, leading to a lot of confusion and high-pitched demands. It is an expectation that the Government would look to clarify the taxability of VDAs from GST perspective as well.
Real estate sector also eagerly awaits to see how this budget addresses key challenges faced by this industry in terms of streamlining the input tax credits rules to mitigate GST costs borne by them and lower GST rates on under construction properties.
Conclusion
As the country strives to make its mark in the international market with its economic supremacy, it is important to provide industry players with tax efficient policies. It is expected that the government will announce more budgetary outlays than before for “Make in India” initiative. Rate rationalisation, amnesty schemes easing the litigation burden on both the taxpayer and the government, extension of production linked incentive schemes including measures and policies providing subsidy/incentives to EV industry are some of the key asks which may see light of the day.
