As Union Budget 2025 approaches, stakeholders across industries are anticipating significant policy measures in the realm of indirect taxation to drive economic growth, streamline compliance, and enhance ease of doing business. With evolving global trade dynamics and the government's push for 'Make in India' and export competitiveness, the upcoming Budget is expected to address crucial issues in customs duties and GST framework.

Customs Duty Reform and Dispute Resolution: Enhancing Competitiveness and Simplification

A key focus area is likely to be the rationalization of the customs duty structure to correct anomalies, remove duty inversion, and support domestic value addition. One of the key expectations which the industry has harboured for long has been an amnesty scheme for Customs. With long-drawn Customs litigations piling up, the time is ripe for the introduction of an amnesty scheme for Customs on the lines of schemes such as Sab ka Vishwas and GST 128A which have proven to be successful in recent years – such a scheme would be particularly helpful in clearing out litigations especially those cases where challenge is to penalty etc.

Investments: Fuelling growth in a sustainable manner

With an India-specific Green Taxonomy being announced in the previous Union Budget, it can be expected that the Government would announce further steps towards sustainability and achieving 500 GW of non-fossil fuel energy by the year 2030. The Union Budget is expected to further incentivize electric vehicles and related components along with green technologies through tariff and non-tariff measures.

Looking at the Government's increased focus on 'Make in India' and 'Aatmanirbhar Bharat', it is expected that the budget would further expand the Production Linked Incentive Scheme (PLI) to key areas such as R&D – expected to stimulate foreign investments; renewable energy – which would empower the domestic manufacturers to scale their capabilities; and space – expected to give momentum to the private sector for contributing to the space infrastructure in the country.

Other key changes expected

The operationalization of the GST Appellate Tribunal has been pending since the introduction of GST. It is absolutely imperative that this year's Budget kays out a clear roadmap for setting up the Tribunal. Since the last amendment to the Tribunal, its composition and its functioning, the needle has barely moved. Over the last two years, we have seen notifications setting up the Principal Bench and State Benches. However, despite the appointment of the President of the GSTAT, the lack of infrastructure and non-functioning of the Tribunal has led to over 14,000 appeals waiting in line to be filed, since August 2023.

The Government may reverse the impact of the judgment of the Supreme Court in the M/s Safari Retreats Case which ruled that the phrase "Plant or Machinery" as used in 17(5)(d) of the CGST Act, 2017, is distinct from "Plant and Machinery" as employed in 17(5)(c). Armed with the recommendation by the GST Council, the upcoming Finance Act is expected to amend Section 17(5)(d) to replace "Plant or Machinery" with "Plant and Machinery".

The 18% GST on insurance premiums makes health and life insurance expensive, affecting affordability. This high tax rate may discourage wider adoption, limiting financial security for many. Reducing GST would ease the burden on policyholders and promote greater insurance penetration. Such a move could support the government's "Insurance for All by 2047" goal by making coverage more accessible, especially in remote areas.

Conclusion

Overall, the Union Budget 2025-26 presents a crucial opportunity for the Government to address key industry expectations, with a focus on fostering growth, encouraging sustainability, and enhancing ease of doing business. From rationalizing the customs duty structure to streamlining GST processes, the government has an opportunity to create a more predictable and efficient tax environment. Addressing sector-specific challenges, improving access to input tax credits, and implementing dispute resolution mechanisms will further strengthen industry confidence and ease the financial burden on businesses, particularly MSMEs. A well-balanced approach in the Budget; one that promotes ease of doing business while ensuring revenue efficiency will be key to driving sustained growth.

(Shashi Mathews, Partner, Rajitha Nair, Principal Associate and Mohd. Omair Usmani, Associate – IndusLaw)

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