Budget FY24: High expectations from FM Sitharaman on tax front

New Delhi: Finance Minister Nirmala Sitharaman will present Union Budget 2023-24 at a time when the global economy is reeling under recessionary pressures.

Since this will also be the last full Budget of this government, the budget proposals are likely to focus on giving impetus to economic reforms and infrastructure developments, including encouraging private sector investments and spur consumption, being liberal from taxation standpoint and aiming at augmenting non-tax revenue.

From the indirect tax perspective, the Budget, 2023 should focus on constitution of GST Tribunal, which represents the second stage of appeal in the GST judiciary. The GST Tribunal is yet to be formed and while this is a priority and focus area for the government, there are some teething challenges in constitution of this judicial body. Currently, taxpayers who are aggrieved by adverse orders passed by the authorities are compelled to approach High Courts for redressal. This is resulting in delays in serving justice and also not bringing any clarity with regards to interpretation of vexed issues in GST. It is expexted that the Finance Minister would provide an update on the GST Tribunal process, challenges anticipated in speedy rollout and expected timeline for operationalisation of the Tribunals.

Although there have been talks of merging the 12 per cent and the 18 per cent GST slabs, expectation of any major overhaul of the rate structure is low. Tax collections under GST are robust and consistent and any structural changes to the rates may adversely impact the collections. The intention of GST authorities only seems to be to rationalise GST rates to address the issue of inverted duty structures.

Introduction of an amnesty scheme qua customs matters vide the Union Budget, 2023 could prove to be a game changer both for the Government and the assessees. Due to high stakes involved in customs disputes, a customs amnesty scheme would help the assessee by lowering the quantum of litigation it faces, which would lower its contingent liabilities - and, in the parallel it would help the Government to augment its revenues.

Manufacturing &Other Operations in Warehouse (MOOWR) scheme, which was revamped by the Indian Government in 2019, replaced an older regime that had been in place for more than 50 years. MOOWR scheme not only extends the benefit by way of deferring the Customs duty but also provides operational flexibility to manufacturers without burdening them with time consuming compliances/procedural requirements. Lack of understanding of technical and administrative issues is indeed preventing some of the businesses to choose the MOOWR scheme.

Given that the Government may implement necessary changes to the scheme, business and industry may need to take this scheme’s WTO compliance and tremendous advantages over other export-oriented institutions currently in place more seriously. Implementation of step towards merging the EOU and MOOWR scheme, and clarification on non-availability of depreciation on used capital goods, when supplied to domestic market post usage (given that a similar facilitation has been accorded to in other parallel schemes).

Also, a reduction in customs import duty on gold is strongly recommended by the Ministry of Commerce in order to provide impetus to export of gold jewellery from the country and also to reduce the import duties. There had been a raise in import duty rates from 10.75 per cent to 15 per cent (Basic Customs Duty 12.5 per cent + Agriculture Infrastructure Development Cess 2.5 per cent) in mid-2022 to limit growing imports of gold.

Further, raising the minimum threshold for GST registration is also recomended as presently all businesses with an aggregate turnover exceeding Rs 20 lakhs (Rs 10 lakhs for select states) are required to register under GST so far as service sector are concerned. The minimum threshold has not been revisited since GST implementation.

One of the major expectation of Budget 2023-24 is that the government would widen the Production Linked Incentive (PLI). It is expected that many new products would also be included under the ambit of the PLI scheme, which incentivises the manufacturers of select products based on the quantum of manufacture.