Other important legislative actions to look forward are directions to authorities and enforcement agencies not to coerce taxpayers for recovery, because of unpaid tax dues owning to common trade practices. Mechanisms to streamline the Input Service Distributor scheme and providing additional clarity on invoicing and cross charge to claim / distribute input credit, rate rationalization on certain household items taking into account the recommendations of the group of ministers, rationalization of input tax credit provisions to remove tax cascading like introducing facility to file revised returns, are also some of the key asks. Discussions are also expected on the review of the provisions related to online gaming, relaxation of blocked credits provisions by excluding necessary expenses incurred in the furtherance of business of exempted supplies from its ambit, provisions around introducing a national tribunal for advance rulings to remove discrepancies across states, and expediting the setup of the GST Appellate Tribunal.

On the Customs front, rationalization of customs duties on certain imported goods and raw materials to promote local production is a key ask. This includes rate rationalization asks on solar batteries, steel sector, lithium batteries for EV, components etc. This is also tied to various PLI schemes of the Government. Strengthening of import duties to prevent dumping from neighbouring countries is a key ask for some industries like textiles. Conversely, removal of dumping duties on certain items like raw materials for aluminium foil, where finished goods imported from neighbours are not subject to duties, is also a key ask for domestic manufacturing.

An Amnesty Scheme for payment of Customs duties long stuck in dispute, introduction of online and streamlined system of refunds, is also a long standing important and key ask from the industry. Changes in existing laws to remove benefits in duty deferment schemes like MOOWR also needs to be stopped. There is also a need to review the Customs Tariff and rationalize entries / duty rates on goods which may have lost their relevance.

A big push is expected in the creation of infrastructure, pushing ahead logistics schemes like Gatishakti and focus on increased job creation and domestic value addition by providing impetus and incentives through PLI schemes. The benefits of the GIFT CITY in Gandhinagar could be expanded to sunshine sectors like data centres, data embassies etc., which have an enormous growth potential in India. In the absence of the proposed DESH Bill, this would be a significant push to modernize the archaic SEZ laws presently in force.

There is significant buzz around the PLI scheme ecosystem in India. While some have been a success, there have been schemes which have not achieved their potential due to lack of scientific planning and vision. In a day, where job creation is paramount to mute the growing unemployment figures and increased focus on research and development is needed for India to be part of global supply chains, the PLI schemes garner much importance. There should be increased focus of creating local manufacturing ecosystems in India and creation of R&D hubs through PLI incentivization for future human capital growth. Additionally, PLI schemes for agrochemicals, gems and jewellery, toys, leather and sectors beneficial for MSME ecosystem in India should be given a push. Existing PLI schemes should be revamped, and scientific methodologies introduced from success stories of the past and industry best practices to make them more investor friendly and less dependent on bureaucratic procedure. Carve out in these schemes for MSME(s) should also be introduced to further integrate the most vibrant industry sector in India. In tandem, duty rationalization (both GST and Customs) should be a thought process to increase manufacture through the PLI schemes.

The government today is not a lone wolf anymore and is reliant on coalition dharma. It should be mindful of challenges of the Indian state like growing unemployment and industry needs and only a balanced approach to expectations can hold them in good stead in the future. Given the needs of the industry and the state, and key expectations that remain unaddressed, the emphasis on creating a balanced and efficient tax, manufacturing and infrastructure eco-system should be paramount in the upcoming union budget.

This article was originally published in The New Indian Express on 22 July 2024 Co-written by: Rajat Bose, Partner; Neeladri Chakrabarti, Consultant. Click here for original article

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