Interim Budget 2024: Expectations

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Interim Budget 2024: Expectations

On 1st February 2024, the Finance Minister will unveil the interim budget for the Financial Year 2024-25. Although not much may be expected from the interim budget, the FM could still tackle some of the issues that require immediate attention and provide clarity on certain policy decisions. We have highlighted a few in the following paragraphs which could be addressed in the interim budget.

Expansion of PLI Scheme
PLI was introduced by the Government in F.Y. 2020-21 to boost manufacturing sector and make Indian companies globally competitive. Currently, PLI extends to 14 sectors and so far, has attracted an overall investment of INR 95,000 crores till September 2023 which has led to production/sales of INR 7.80 lakh crore1.

Recently, the Government formed a panel to examine the demand of auto-industry for including more components under PLI2. Announcements related to expanding the PLI scheme to other sectors during the interim budget can kickstart this process early allowing industries sufficient time to prepare the groundwork.

Establishment of GST Appellate Tribunals
In the 49th GST Council meeting, GST Council suggested creation of GST Appellate tribunals with one principal bench located in Delhi and 31 State branches. Further, in the 52nd meeting the GST Council recommended amendments in the CGST Act, 2017 to provide for the appointment of President and Members of the proposed GST Tribunal3. However, there has been no further developments in this regard.

Given the high number of show cause notices which are being issued by the GST authorities under the GST regulations, the Government through the interim budget must address establishment of Appellate Tribunals to provide quick and alternative dispute resolution mechanism for taxpayers.

Clear Policies for Start-Ups
In F.Y. 2023-24, the funding to start-ups has significantly declined4 however the sector has lot to offer. As such, the sector is looking at the Government to provide a boost in the form of tax concessions. The expectations range from tax relief on carry-forward losses and employee stock options to a dedicated venture capital fund, alongside incentives for R&D and tech-driven solutions. A focus on simplifying regulations and fostering digital infrastructure development would also be music to their ears, fueling innovation and paving the way for their rise as engines of the economy. Streamlining regulations and boosting digital infrastructure would be a resounding win for startups, unleashing their innovative potential and driving their ascent as economic powerhouses.

Reduction in GST for EV Sector
There has been significant development in the growth of the EV sector in India. According to data from the Society of Manufacturers of Electric Vehicles (SMEV), electric two-wheeler sales almost tripled in F.Y. 235.

Notably, the Government has reduced subsidies provided under the FAME Scheme6. In the immediate aftermath, there was a significant slowdown of sales of two-wheeler EVs. Further, the current rate of GST levied on the EV batteries stands at 18% which increases the cost of production and as a result it is not accessible to a broad range of people in the country. By providing reductions in the GST rates the Government can encourage consumers to embrace electric vehicles boost investments and expedite job creation, in the EV industry.

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