[Opinion] Shaping India’s Future | Key Expectations from Union Budget 2024-25

Krishan Arora, Devika Dixit & Pragya Sharma – [2024] 163 taxmann.com 533 (Article)

With the NDA government securing another term in office, all eyes are on the Union Budget 2024-25, expecting the same to be a cornerstone in shaping India’s economic future. As the nation stands at the crossroads of recovery and growth, this budget may present a golden opportunity to reinforce India’s industrial might, drive innovation, and embrace sustainability. The anticipation is palpable, with industry leaders and economic stakeholders eagerly awaiting measures that will not only bolster economic resilience but also propel India towards sustainable and inclusive growth. In its vision of becoming the world’s third-largest economy by the end of this decade and a ‘Viksit Bharat’, India has emerged as the fastest growing economy and a global manufacturing hub fuelled by initiatives such as ‘Make in India’, production-linked incentives, skill development, supply chain diversification, among others.

The budget is expected to focus on boosting home grown industries, anti-evasion measures,digital innovation, and infrastructure development. These proposals would align with the government’s objective to create a predictable tax environment that fosters economic growth and investment.

Indirect taxes, a significant contributor to the national exchequer, are expected to play a pivotal role in shaping the fiscal strategy.As the country looks to cement its position as a global economic powerhouse, industry leaders are eagerly anticipating key reforms in Indirect taxation. Focus areas may include expansion of Production Linked Incentive (PLI) schemes, substantial push for the electric vehicle (EV) sector, introduction of innovative green taxation policies, streamlining GST rates & compliances and revising customs duty rates and structures. These strategic initiatives would not only bolster economic growth but also drive sustainable development, making this budget a steppingstone for India’s future prosperity.

1. Expansion of PLI Schemes

The industry anticipates an expansion of PLI schemes to include more sectors. Currently, sectors like electronics, pharmaceuticals, and textiles benefit from the scheme. Extending it to sectors such as semiconductors, renewable energy, and advanced automotive components could further bolster India’s manufacturing capabilities. To sustain and enhance the momentum, an increase in budget allocations for existing PLI sectors is also expected.

2. Boost to EV industry

The EV industry in India is at a nascent stage but holds significant potential for growth. With the global shift towards sustainable transportation, India aims to be at the forefront of the EV revolution. Currently, the Goods and Services Tax (GST) rate on EVs is set at a favorable 5%. However, industry stakeholders are hopeful that the upcoming Union Budget may include further incentives, specifically reduced GST rates for batteries and other critical components, to bolster the industry’s growth. In addition to GST reductions, there is a strong expectation for enhanced tax incentives for EV manufacturers. This could include subsidies for establishing manufacturing units and tax holidays, which would significantly lower the initial investment barriers and encourage more players to enter the market.

3. Green Taxation

As India commits to its climate goals under the Paris Agreement, green taxation is emerging as a critical tool to drive environmental sustainability. The introduction of a carbon tax on industries with high carbon emissions is also something India Inc may expect. This would not only encourage industries to adopt greener technologies but also generate revenue that can be invested in sustainable projects. Tax incentives for companies investing in renewable energy projects, energy-efficient technologies, and sustainable practices are also anticipated. This could include accelerated depreciation for green investments and lower corporate tax rates for companies achieving sustainability benchmarks.

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