Given the mission of the Government to promote Make in India scheme and its concept of Atmanirbhar Bharat, it is expected that the Government will hike the customs duties on imports in select sectors like aerospace, high-end electronics, jewellery, paper and plastic in order to boost local sourcing of the components in the said sectors. The stakeholders of the Production Linked Incentive (PLI) scheme are likely to benefit from the said hike in duties and the domestic market for said sectors may also see a considerable investment.
In furtherance of the recent GST exemptions proposed in respect of ethanol blending by the GST Council, Budget 2023 may also contain certain benefits on the customs front for the said sector. It appears to be the Government’s intent to promote investments in the said sector, which is a very import intensive sector and duty concessions at this stage may provide the necessary impetus in driving growth in the said segment.
Similarly, the Digital India initiative of the Government may also get some push through duty concessions in the telecom sector. Given the importance of 5G implementation in the country, the Government may incentivise further investments in the sector by providing certain duty concessions in the telecom sector.
Government may also want to ride on the past success of the amnesty schemes under the erstwhile legislations like service tax, excise and income tax and introduce a similar amnesty for the Customs laws in the country. This should prove to be beneficial both for the Government as well as the industry. While government may want to collect the pending recoverable duty amounts currently blocked due to ongoing litigation, the industry and specially the MSME sector would be eager to close on their ongoing litigation with the Tax Department. Some of the legacy disputes under customs laws including those relating to fulfilment of export obligations and classification may be covered under the said amnesty scheme, wherein the benefits may include waiver of part-interest and the entire penalty amounts.
Even under GST laws, given the absence of a Tribunal for such a long period of time, a huge amount of Government dues stands blocked in litigation. It might work in favour of the Government to introduce an amnesty scheme for GST as well, covering disputes like levy of late fee and for mismatch of credit between GSTR-3B and GSTR-2A, albeit for the first three years of implementation of GST.
Setting up of GST Tribunal is also a key topic that may be provided for in the Budget 2023, but it will need to be seen whether the same is taken up as part of the Budget in light of the background that the last GST Council meeting did not take up the said issue. Delay in the formation of GST Tribunal is adding to the workload of the High Courts in the country, and its implementation in the Budget 2023 may also provide a major relief to the industry. The potential of blockchain technology and its varied applications including in the form of crypto currencies has been on the close watch of the Government in the recent past. Looking at the past trends and the vacuum under the GST laws as regards the taxation of such cryptocurrencies, the Government may also provide for certain clarifications in the Budget 2023 in lines with the VDA tax that was introduced in the last budget.
It is expected that the focus in Budget 2024, on the indirect tax front, would be to achieve reduction in the forex expenditure and to seek closure on some of the ongoing litigations. Apart from this, the recommendations of the GST Council in its last meeting are also likely to be implemented through necessary amendments in the GST laws.
The writer is Partner – Tax, IndusLaw