Indirect Taxes: Reduced Tax Burden moving towards Trust

The Goods and Services Tax (GST) collections have made a significant contribution to the total tax receipts of the government. The GST Council has met fifty-five times in the tenure of seven years to make recommendations with respect to GST rate changes, streamlining compliances in GST, and measures for facilitation of trade, among others. The Union Budget has echoed these recommendations by proposing the necessary amendments in the Finance Bill.

Cutting-edge tax technology

The 2025 Union Budget introduces a series of amendments aimed at enhancing GST compliance and streamlining procedures. A key proposal includes an enabling clause that allows the government to prescribe conditions and restrictions for creturns on the GSTN portal. This empowers the establishment of a comprehensive framework for GST compliance, aligning procedural updates with legal provision to ensure all changes in the GST filling process are legally supported.

Tax certainty

Addressing a long-standing concern, the Budget redefines the treatment of vouchers. Under the new provisions, vouchers are no longer considered a supply of goods or services and hence non-applicability of GST. This change eliminates ambiguities around their taxability, simplifying compliance for businesses involved in voucher transactions and providing clarity within the GST framework. Credit note provisions have been amended.

Rationalisation of custom tariff

The customs tariff structure has been rationalised by removing seven tariff rates which will not only strengthen domestic manufacturing but also encourage exports.

With a reduced tariff slab rate, it is clear that the government intends to achieve rationalisation of customs duty structure in India. In this Budget, seven tariff rates have been removed-25 per cent, 30 per cent, 35 per cent, and 40 per cent reduced to 20 per cent, while 150 per cent, 125 per cent, 100 per cent, reduced to 70 per cent.

This way, the government has aimed both at rationalisation of tax rates and not majorly impacting the overall revenue of the government. However, a key consideration is that the reduction in tariff rates will also lead to a reduction in classification disputes.

Input tax credit on construction

Earlier, the GST law prescribed restriction of Input Tax Credit (ITC) concerning inputs or input services incurred for the construction of an immovable property (other than plant or machinery). Now, the government has proposed a retrospective amendment that replaces the phrase ‘plant or machinery’ with ‘plant and machinery’.