As Union Budget 2025 approaches, all eyes are on Finance Minister Nirmala Sitharaman as India Inc eagerly awaits for what could be a defining moment for the country’s economic future. Set to be unveiled on February 1, the Budget holds the potential to bring in reforms that align with the government’s vision of a “Viksit Bharat” and that of “Ease of doing business”. The past year has already seen transformative changes and clarifications on key issues including the taxability of intermediaries, corporate guarantees, GST treatment for vouchers and the introduction of the highly anticipated GST Amnesty scheme. There was also the landmark decision in the case of M/s Safari Retreats with respect to admissibility of construction-related credits, while the GST Council’s recent proposal to amend the law retrospectively, triggered anxiety in the real estate sector.
Based on ongoing discussions and considerations, India Inc. optimistically awaits the rationalization of the current tax structure, which consists of five main slabs (0%, 5%, 12%, 18%, and 28%) along with two additional rates (3% and 0.25%). The industry has been calling for a simplified, three-tier tax system that would streamline compliance and reduce the tax burden on consumers. With the Compensation Cess set to expire in March 2026, businesses are advocating for gradual rate rationalization to ease the tax burden of consumers and also to stimulate domestic manufacturing, propelling the “Make in India” vision.
A streamlined compliance framework is as crucial for a successful GST administration as its legal framework. As the system evolves with introduction of IMS and revised reporting requirements as per Circular 170/02/2022 aimed at integration and clearer transaction trails, businesses are now hoping that the Budget will bring much-needed reforms to simplify the compliance process and overhaul the currently cumbersome GST return filing system. On a similar note, Customs compliances are equally cumbersome and time-taking. To transform the dream of “Ease of Doing Business” into a tangible reality, cutting through the complexity of reporting regulations is the key, allowing businesses to focus on growth and expansion rather than navigating a maze of regulations.
Rationalization of Customs tariff rates is critical; we had seen the previous Budget review Customs duties on items such as mobile phones, gold, and silver. Building on the Finance Minister’s commitment in the previous Budget to conduct a comprehensive review of the Customs duty structure, the industry is awaiting tangible reforms aimed at simplifying Customs tariffs, removing duty inversion and reducing trade disputes.
The need for an amnesty scheme for ongoing Customs related matters, along the lines of Sab ka Vishwas, is becoming increasingly urgent, to address years of unresolved litigation. While the government has successfully rolled out similar relief measures under GST and income tax laws (Vivad se Vishwas), Customs is yet to see a comparable solution. Introducing an amnesty scheme in the upcoming Budget, which could allow settling of long-standing cases through payment of taxes while waiving interest and penalties, could be a transformative step, especially for small businesses.
Almost a decade has passed since the Special Valuation Branch (SVB) procedures under Customs were revamped in February 2016. While the reform cleared the process, the system still faces significant challenges, particularly delays associated with the process. These prolonged investigations have resulted in a substantial backlog, with SVB cells overwhelmed by pending cases. It is now crucial to introduce a time-bound approach to ensure that future investigations are concluded efficiently, while also addressing the backlog of prior cases. Towards this, it would be great to see the upcoming Budget introduce a dedicated scheme with a fixed timeline for resolution.
As Union Budget 2025 rolls in around the corner, hopes are high that this will usher in reforms capable of streamlining the tax system, tackle long-standing challenges and create the ecosystem for growth and innovation—ultimately paving way for a Viksit Bharat.
Source #TOI
