Union Budget 2024: Streamlining Indirect Tax Compliances - Expectations and Challenges

With the Union Budget 2024 set to be presented on July 23, taxpayers and industry experts alike are keenly anticipating changes aimed at streamlining indirect tax compliances, particularly concerning the Goods and Services Tax (GST) and Customs procedures. Saloni Roy, Partner at Deloitte India, sheds light on the current challenges and expected amendments that could significantly impact the tax landscape.

Simplifying GST Compliance

The GST was introduced to simplify India’s tax regime, but taxpayers still face several hurdles. Here are some of the key challenges and expected changes:

Registration Complications

GST registration requires a set of prescribed documents. However, during the application scrutiny, authorities often demand additional documents not listed under the law, such as notarised copies of No Objection Certificates (NOC) or original lease deeds. This leads to delays and additional burdens on taxpayers. A more streamlined and consistent approach to documentation could alleviate these issues.

Biometric Aadhaar Authentication

Currently, key managerial personnel (KMPs) must visit facilitation centres for biometric Aadhaar authentication, which is both time-consuming and cumbersome. A potential solution is allowing KMPs to complete this process at any facilitation centre nationwide, reducing the travel burden and expediting the registration process.

Tax Payments by Overseas Taxpayers

The rise of e-services has expanded the taxpayer base under GST, particularly for online information database access and retrieval (OIDAR) services. However, the process for overseas taxpayers to remit GST payments via Indian intermediary banks is slow and prone to delays. Establishing a more efficient payment system through overseas banks could streamline this process and ensure timely tax remittance.

Addressing IGST Payment Delays

When importing goods, the payment of Integrated Goods and Services Tax (IGST) is made on the ICEGATE portal. However, delays in reflecting these payments on the GSTN portal result in discrepancies in Form GSTR-2B, causing automated notices to be sent to taxpayers. Enhancing the data transmission process between ICEGATE and the GST portal would mitigate these issues.

Challenges in Claiming Input Tax Credit (ITC)

One major challenge under GST is ensuring that vendors have remitted the GST to the government. Currently, there is no online mechanism for buyers to verify this, making it difficult to comply with ITC conditions. Developing a system to track vendor payments would reduce the risk of unwarranted litigation and ease the compliance burden on genuine taxpayers.

Additionally, ITC is often denied when a vendor’s GST registration is cancelled retrospectively. Implementing a real-time tracking system for vendor registration status could prevent such issues and ensure fair treatment of buyers.

Improving Customs Procedures

Customs procedures also face several challenges, and the Budget 2024 is expected to address these:

SVB Investigation Timelines

The Special Valuations Branch (SVB) of Customs often takes years to conclude investigations on imports from related parties, leading to provisional imports and the need for continuous bond submissions. Establishing a clear timeline for SVB investigations and adhering to it would expedite the process and reduce the burden on importers.

Digitisation of Customs

Despite advancements in the clearance of goods, some Customs processes remain manual, such as filing refund applications and replies to notices. Moving these processes online, similar to GST compliances, would save time and align with the ‘Digital Bharat’ mission.

Parting Thoughts

The Union Budget 2024 is poised to set the course for India’s economic trajectory over the next five years. By addressing the aforementioned challenges and streamlining tax compliances, the government can further its goal of making India the fastest-growing economy in the world. Stakeholders are hopeful that the upcoming budget will introduce measures that simplify procedures, reduce litigation, and promote ease of doing business.