Union Budget 2024: What India Inc is expecting from FM in terms of reforms in GST arena

Finance Minister Nirmala Sitharaman is preparing to present the first Budget in the third term of the BJP-led NDA government on July 23, 2024. While different sectors are forwarding and expressing their expectations, most of them are keen on a revision in indirect tax rates to boost consumer spending. Earlier it was reported that the Centre has agreed to the necessity for gradual rate rationalisation within the Goods and Services Tax (GST) framework.

Policymakers have also been advocating an overhaul of indirect tax rates. The central government is not obligated to consult with the states when adjusting income slabs or income tax rates. However, when considering GST rate cuts, the involvement of states is necessary to reach a mutual agreement on a matter that could impact the revenue of both states and the central government.

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As per experts, a committee focused on GST rate rationalisation need to meticulously deliberate on the specifics of adjusting rates, possibly starting by listing items for rate rationalization that have previously been examined in prior meetings.

Last week, CBIC Chairman Sanjay Kumar Agarwal said the decisions taken at the GST Council meeting last month, like amnesty scheme for initial years of rollout and sunset date for profiteering complaints, will be incorporated into the Finance Bill to be tabled in Parliament, along with the Budget later this month.

Here are some expectations by top experts:

1. CGST Act and IGST Act: Various amendments in the CGST Act and IGST Act are expected, to give effect to the recommendations made by the GST Council in its 53rd meeting, Gunjan Prabhakaran, Partner & Leader, Indirect Tax, BDO India, said. 

Some of the amendments are: 

> Introduction of Section 11A, giving the Government power to regularise any non/short levy on account of industry practice 

> Amendment in section 16(4) of the CGST Act to extend the time limits for claiming ITC for the period FY2017-18 to FY2020-21 

> Introduction of Section 128A to bring an amnesty scheme for waiver of interest and penalty on payment of tax as per notice, in the cases not involving fraud, suppression etc 

> Amendment to introduce a common time limit to issue notices in all cases, whether involving fraud, suppression etc or not 

> Amendment in schedule III to exclude sharing of premium between co-insurers from definition of supply etc

2. Section 17(5) of the CGST Act

Relaxation of Section 17(5) of the CGST Act by reducing the list of blocked credits by excluding various expenses incurred in the course of business from ambit of section 17(5).

2. IT sector’s concerns

> The tax authorities have issued demands on several entities demanding GST and interest for non-receipt of foreign exchange within one year period. The GST law does not provide for such consequences except for the wordings in the Letter of Undertaking (LUT) executed by the exporters, who claim refunds. The Government should consider the substance of the transaction which is ‘export of services’ and provide specific guidance to condone the delays in receipt of consideration for export of services, Prabhakaran added.

> The current formula to claim refund of accumulated credit by exporters restricts the refund of input tax credit availed on Capital goods. This restriction is causing the blockage of working capital and it would help the exporters, if the Government revisits such exclusion and allows refund of ITC on capital goods, even if allowed as staggered over a period of time.

3. Healthcare sector

The healthcare sector expects that interstate movement of equipment between branches for providing health care services should be exempted from GST, as the recipient is unable to claim ITC and the equipment have already suffered tax once without claim of ITC, Prabhakaran added.

Shashank Avadhani Co-founder & CEO, Alyve Health said: “To benefit the users further, the government should consider waiving off GST for preventive healthcare plans, including annual health checkups, prescribed diagnostics, wellness plans, etc. This will reduce costs and encourage users to opt for these services proactively.”

4. Manufacturing Sector

India’s manufacturing sector is poised to play a pivotal role in achieving the aspiration of reaching a $10 trillion economy. Central to this vision is the budget’s imperative focus on bolstering self-reliance within the country and elevating India to a prominent position as a leading global manufacturing destination. The amplification of the Make-in-India initiative stands to benefit significantly from policies that prioritize and facilitate local manufacturing endeavors. As highlighted in the recent report released by the Confederation of Indian Industry (CII), the trajectory for India’s Electronics Manufacturing sector indicates a projected expansion to USD 500 billion by the year 2030. 

“There is a pressing need for a growth-oriented tax environment to catalyze India’s economic progress and from the Upcoming Union Budget, we expect The Finance Minister to look at reforming GST structure, including rationalisation of rates and simplification of compliance procedures. The manufacturing sector is very capital-intensive and the introduction of tax holidays and enhanced input credits for upcoming manufacturing units will be crucial in stabilizing operations and expansion,” said A Kulandai Vadivelu, Chief Financial Officer, TVS Electronics (TVS-E)

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