The budget session is a crucial part of the parliament process and outlines the government's upcoming policy, budgeted expenditure and expected revenue for next financial year. Generally, the finance minister presents a comprehensive budget during this session. However, considering 2024 is a Lok Sabha election year, the upcoming budget, set for presentation on February 1, 2024, is a vote-on-account budget.
The full-fledged budget for the fiscal year is likely to be disclosed by the new cabinet, possibly in July, following the conclusion of the general election. The interim budget is expected to focus on boosting demand, creating jobs, and putting the economy on a sustained growth path.
In the recent past, we have witnessed Indian indirect tax law has undergone significant economic transformations. The introduction of the Goods and Services Tax (GST) law in 2017 stand out as a landmark event in India's economic history. This initiative aimed to simplify the taxation system and foster economic growth by replacing numerous central and state taxes. Some notable changes were also brought in Customs law like alignment of global Harmonized System of Nomenclature (HSN) and introduction of phase manufacturing programme (PMP) for certain technological advances products.
Over the last few years, the manufacturing sector has also witnessed issuance of various Production Linked Incentive (PLI) schemes to encourage make in India. These reforms have made a remarkable impact on the Indian taxation sector, leading to an era moving towards efficiency, transparency, and simplicity.
Under the GST law, the GST council is empowered to address challenges faced by taxpayers. Necessary directions by GST council through regular meetings has led to elimination of major amendments during the budget session. Technological advancements have played a pivotal role in refining GST operations. Processes like integrating e-invoices with GST returns, online appeals, and e-filing of refunds through the GST portal have significantly improved the overall functionality of GST. The integration of technology allows tax authorities to ensure enhanced compliance and implement more stringent checks and balances.
Under the GST regime, initially, the government's average monthly GST collection ranged from 0.8 to 1.2 lakh crore. However, in FY24, this average monthly GST collection has surged to Rs. 1.66 lakh crore in the first 9 months, representing a 12% increase in GST collection as compared to INR 1.49 lakh crore collection recorded in corresponding period of FY23. This data highlights the substantial growth in both taxpayer numbers and GST revenue since the implementation of GST.
Given the healthy GST collections, currently there is no anticipation of any changes in tax rates or the implementation of new taxes or cess. However, changes proposed by GST council can be implemented through legislative amendments. Further, clarifications have been expected on below issues:
Taxability of virtual digital assets (VDA)
Applicability of GST on Employee Stock Option Plans (ESOPs) granted by group Companies
Requirement of state-wise trial balance
Taxability of discount issued on purchase of gift cards/ voucher
In terms of other indirect tax budget expectations, there are anticipations that the government will introduce certain measures on domestic sales by Special Economic Zones (SEZs). Further, it is expected that the interim budget might introduce an amnesty scheme under customs law, similar to those in income tax and service tax, with the aim of reducing litigation. The digitalization of customs litigation processes is also likely to be a part of the interim budget, reflecting efforts towards modernizing and enhancing efficiency in customs procedures.
Furthermore, certain provisions within the CAROTAR Rules pose challenges for importers, and these requirements may not align with the terms of the Free Trade Agreement (FTA) between countries. Therefore, it is anticipated that there will be amendments to customs laws in the forthcoming budget to provide a clear definition of 'reasonable care' that importers must exercise.
The Government is committed to support the growth of the Indian economy and has been taking measures from time to time to address concerns of industry. While in the interim budget substantial announcement regarding GST and customs are not anticipated, the budget announcement when new Government is in place would have changes to reflect the vision and intent of the new cabinet.
(This article was written by Saloni Roy, Partner, Deloitte India; views expressed are the author's own)