Finance Minister Nirmala Sitharaman will present her last Union Budget on 1 February 2023 before the general elections due in 2024. This budget 2023 is being presented as a gap budget, it is the first budget after the pandemic and also the last full year. Budget ahead of Lok Sabha elections While tax collections have been strong this fiscal year to reduce revenue and projections, in its announcements in the upcoming budget, the global economic slowdown, in its announcements, is expected to be significant for the Indian economy due to the emergence of fears of a global recession. Challenges also have to be kept in mind. , and geopolitical concerns like Russia – ukraine crisis.
The Goods and Services Tax (GST) regime will complete five years in 2022. While the first five years have brought about fits and starts with significant developments, there are key aspects of governance that are yet to be implemented. The main wish of the industry is to see the GST Appellate Tribunal functional this year, and its establishment is a key expectation of Budget 2023. This is especially important as there has been a manifold increase in the State High Courts in writ petitions relating to GST. (S) In the absence of an Appellate Tribunal, the appellate remedy for taxpayers has led to an increase in caseload and delays. A provision for a centralized authority to address the issues and confusion arising out of contradictory orders passed for advance rulings by GST authorities in different states is also a demand of the industry which needs to be taken into account.
This time, hopes are also around the implementation of the recommendations of the GST Council, especially on matters related to raising the threshold limit for initiating criminal prosecution; further steps to rationalize tax rates and eliminate the inverse credit structure; and the expectation of rationalizing the provisions for availing input tax credit by the recipients of supplies. To the extreme end, the input credit structure today puts the onus of correctness of availing credit on the recipient even for compliance/non-compliance of sellers. It is a long standing desire of the industry to examine these provisions and implement some practical rationalizations to make the provisions business friendly.
Other key expectations from Budget 2023 are clarity on taxation of virtual digital assets such as cryptocurrency and taxation of NFT(s) and online gaming platforms. Implementation of the recommendations of the Panel of Ministers of the GST Council with regard to tax rates and assessment of services by online gaming platforms should be carried out to prevent large scale confusion and intimidation in the industry.
On the customs duty front, duty may be increased on non-essential items such as high-end electronic/luxury items to prevent import dependence and promote its manufacture in the domestic industry. On the issue of customs duty reduction, since India With India experiencing transition of its domestic telecom network to 5G technology, and for which infrastructure has to be mostly imported, rate cut on import of such infrastructure is a major expectation from the telecom industry. A reduction in customs duty on medical equipment, where the ability to replace imports is still some time away, should also be considered to fulfill the government’s promise of providing low-cost affordable healthcare.
Technological progress should also be promoted in Budget 2023 and the government should focus on encouraging or promoting technology to make India a talent hub for emerging technologies. Tax incentives on capital expenditure for expansion, capacity utilization and use of new age technology applications like Internet of Things (IoT), Machine Learning (ML), etc. should be actively considered in this budget. A push to implement blockchain technology in the regulatory ecosystem is also welcome, with pilot projects already successfully conducted to introduce such technologies in customs operations with satisfactory results.
It will be interesting to see how Budget 2023 unfolds in the light of myriad industry expectations. In laying out an evolved path of recovery and a forward looking outlook, the budget should aim to strike a balance between focusing on collections as well as providing incentives to the industry to recover from the injury from the pandemic, especially as the forecast rises. Yes, of further economic recession. Budget 2023 should not be overly populist but should draw a fine line between industry expectations and the financial realities of the economy. It should be practical to meet the challenges of the financial year while continuing to support the emerging domestic industry.
Rajat Bose, Partner and Niladri Chakraborty, Consultant – by Shardul Amarchand Mangaldas & Co.
Disclaimer:The views expressed in this article are the author’s own and do not represent the stand of this publication.
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