With the Union Budget 2024 scheduled for release on July 23rd, all eyes are on Finance Minister Nirmala Sitharaman as she prepares to unveil critical policy measures. Expectations are high across various sectors, particularly regarding reforms in indirect taxes, economic stimulus initiatives, and targeted regulatory changes. Stakeholders are anticipating significant announcements that could reshape India’s economic landscape.
Here’s a detailed exploration of what experts and industry leaders foresee in the upcoming budget:
Indirect Taxes (GST)
A major area of focus for the upcoming budget is expected to be GST. The government is looking to revise indirect tax rates to boost consumer spending. Experts believe a committee should be formed to deliberate on the specifics of adjusting GST rates. The healthcare sector is expecting an exemption from GST on interstate movement of equipment, and the manufacturing sector is looking for tax holidays and enhanced input credit.
Here’s a breakdown of some key expectations by industry leaders:
- CGST and IGST Act Amendments: Experts anticipate various amendments to the CGST and IGST Acts to implement the recommendations from the 53rd GST Council meeting. These amendments include introducing a section empowering the government to regularize any tax not levied due to industry practices, extending the time limit for claiming input tax credit (ITC) for specific fiscal years, and introducing an amnesty scheme to waive interest and penalty on tax payments in specific scenarios.
- GST Rate Rationalization: Industry experts recommend establishing a dedicated committee to meticulously examine the specifics of adjusting GST rates. This committee could begin by identifying items for rate rationalization that were previously considered in prior meetings.
- Relaxation of Section 17(5) of the CGST Act: Experts propose a relaxation of this section by reducing the list of blocked credits. This would exclude various business-related expenses from the purview of Section 17(5).
- Addressing IT Sector Concerns: The tax authorities have demanded GST and interest from several IT companies for delays in receiving foreign exchange within a one-year period. Experts argue that the GST law doesn’t necessitate such penalties unless explicitly mentioned in the Letter of Undertaking (LUT) signed by exporters claiming refunds. The government should provide clear guidelines to condone delays in receiving export service consideration.
- Refund of Accumulated ITC by Exporters: The current mechanism for claiming GST refunds of accumulated credit by exporters restricts the refund of input tax credit availed on capital goods. This limitation restricts working capital for exporters. Experts recommend that the government revisit this exclusion and allow refunds of ITC on capital goods, even if spread out over a period.
- Revised procedure for mechanism to be followed for Input Service Distributor (ISD) mechanism Reform
- Re-formulating the concept of large taxpayers (LTU) to provide a single window clearance point for large taxpayers.
Income Tax Relief
In the upcoming budget, taxpayers are expecting relief measures on income tax. This is expected to increase disposable income, which is the money left after paying taxes, for the common man and the middle class. An increase in disposable income will likely lead to a boost in consumer spending which can help the economy grow.
Rationalization of withholding tax (TDS) provisions: The Government might consider clubbing all withholding tax categories into three slabs: (a) 1% for transactions for data gathering like purchase of goods, sale of property, etc. (b) a unform 5% rate for all other transactions, and (c) a penal rate of 10% or 15% for situations where there is no Permanent Account Number (PAN) available.
Revisiting the tax slabs and basic exemption limit
Increasing the quantum of deduction under Section 80C
Standard deduction to be increased:
The Indian Banks association has raised the demand that investments of up to Rs. 5 lakh in fixed deposits are expected to be tax free.
Boosting the Economy
The manufacturing sector is hoping for a tax holiday and enhanced input credit in the upcoming budget. A tax holiday is a period during which a new business is exempt from paying certain taxes. Input credit refers to the tax paid on purchases that a business can claim as a deduction from the tax it owes on its sales. These measures would help the manufacturing sector stabilize operations and expand.
Real Estate and Housing Sector
The real estate sector is eyeing the budget with anticipation, hoping for policies that will revitalize the industry. Homebuyers are looking forward to tax relief through a significant increase in the home loan interest deduction cap. Developers, on the other hand, are advocating for a reduction in long-term capital gains tax.
A key demand is a more nuanced definition of affordability that acknowledges varying costs in different locations. This would replace the current one-size-fits-all approach. Industry leaders believe granting “industry status” to real estate would be a game-changer, attracting investment and boosting growth. Additionally, streamlining approvals through a single window clearance system is seen as crucial for reducing project delays. These measures aim to make real estate a more attractive proposition for both homebuyers and investors, ultimately fostering sustainable growth in the sector.
Healthcare Sector
India’s healthcare sector is yearning for a budget boost. Their top priorities include a significant funding increase to make healthcare more accessible for the public, with a target of 2.5-3% of GDP. Additionally, they’d like to see existing programs like Ayushman Bharat strengthened through collaboration between public and private entities. Investment in medical research and development is another key area of focus. In essence, the budget is viewed as an opportunity to improve affordability, access, and innovation within India’s healthcare system.
Social Sector Spending
There is an expectation that the budget will allocate more funds towards social sector spending. This includes healthcare,education, and social welfare programs. Increasing spending on social programs can help address the needs of vulnerable populations and promote inclusive growth, which means economic growth that benefits everyone in society.
Infrastructure Development
Investments in infrastructure development are a key priority for the government. The budget is likely to allocate funds for improving roads, railways, and other critical infrastructure.
Support for the Agriculture Sector
The agriculture sector is a major source of employment in India. The budget is expected to include measures to support farmers, such as subsidies for irrigation and seeds.
Conclusion
The Union Budget 2024 is a highly anticipated event that will shape the course of the Indian economy in the coming year. With a focus on GST reforms, economic growth, and social welfare, the budget is expected to address a wide range of issues. It will be interesting to see how the government balances these priorities and allocates resources in the upcoming budget.
It is important to note that these are just some of the expectations for the Union Budget 2024. The actual budget proposals may differ.
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