The upcoming Union Budget for the fiscal year 2025-26 stands as a pivotal opportunity for the Indian government to tackle pressing economic challenges and pave the way for robust growth. One significant initiative is the digitization of compliance processes by the Central Board of Indirect Taxes (CBIC). This encompasses broadening the scope of e-invoicing, enhancing the Invoice Management System (IMS) for GST credits, and promoting faceless assessments to streamline operations for businesses.
Revamping the Tariff Structure and GST Rate Rationalization
As part of its efforts to foster a conducive business environment, the government has prioritized restructuring the tariff landscape, particularly concerning import duties on vital raw materials and capital goods essential for domestic manufacturing. This overhaul also includes the rationalization of the Goods and Services Tax (GST) rate structure to simplify the system and minimize conflicts. A key aspect of this initiative is the formation of a GST rate rationalization committee, established under the GST Council, tasked with reducing disputes related to classification, eliminating credit chain disruptions, and expanding the tax base.
Although extensive discussions have taken place, the committee’s formal report on rate rationalization has yet to be released. Given the complexity of these adjustments, careful consideration is essential to avoid unintended consequences, ensuring a balanced approach to revenue objectives and streamlining the existing four-tier rate structure. Moreover, sectors adversely affected by tax inversions, such as textiles and fertilizers, require meticulous attention.
Addressing Customs Disputes and the Call for Amnesty
The government is urged to address lengthy legal battles that overwhelm the judicial system and hinder business operations due to unresolved customs disputes. Many businesses find themselves locked in litigation that blocks essential working capital due to pre-deposits or duties paid under protest. An amnesty scheme for customs disputes could significantly alleviate these challenges, offering a relief mechanism that the industry has long awaited.
Despite technological advancements and the implementation of faceless assessments, the process for resolving customs disputes remains largely manual. A digital platform designed to manage these disputes is necessary for greater efficiency. Additionally, integrating compliance platforms across both Customs and Foreign Trade Policy is crucial to streamline operations currently managed by different ministries.
Enhancing Confidentiality and Time Efficiency in MOOWR Transactions
To further support the manufacturing sector, the CBIC has issued guidelines governing the transfer of goods between Manufacturing in Customs Bonded Warehouses (MOOWR). These provisions ensure accurate record-keeping of transferred goods, including duty liabilities. However, the requirement to disclose the initial import value during transfers might inadvertently compromise business confidentiality. A shift towards limiting disclosures to only necessary duty amounts is warranted.
Moreover, the prolonged Special Valuation Bench (SVB) investigations related to transactions between related parties have led to substantial backlogs and uncertainty regarding customs duties. Adjusting the SVB Circular to finalize provisional assessments automatically if investigations exceed two years could alleviate some of these pressures.
Conclusion: A Roadmap for Growth and Facilitation
India stands at a significant crossroads, with the potential to leverage ongoing reforms to enhance trade facilitation, invigorate the manufacturing ecosystem, and simplify the business landscape. By fostering stronger trade relationships and exploring new markets through strategic free trade agreements, the nation can boost trade and lower tariff burdens. Furthermore, by advancing technology-driven exports, e-commerce, and digital trade while ensuring clarity in tax policies, the Budget 2025 announcements will be vital in supporting the “Make in India” initiative. As industries eagerly await these critical reforms, the path forward appears bright, filled with opportunities for sustained growth.
