Brief Note on Interim Union Budget For FY 2024-25

Introduction: The Interim Union Budget for the fiscal year 2024-25 was unveiled with a focus on conservatism, confidence, and continuity. Presented in a concise 57-minute speech, it refrains from major policy shifts or tax amendments, maintaining stability. This article delves into the key aspects, including the economic outlook, fiscal projections, and notable changes in direct and indirect taxation.

Interim Union Budget 2024-25 was presented in the Parliament by the Finance Minister on 1^st February, 2024. As it is an interim budget, there are no major policy announcements or tax provisions announced.

The interim budget can be summed up as a result of conservatism, confidence and continuity. It was one of her shortest ever budget speech (57 minutes).

Keeping with the convention, she did not propose to make any changes relating to taxation and proposed to retain the same tax rates for direct taxes and indirect taxes including import duties. There is no tweaking of tax rates, concessions or exemptions.

Here is a crisp outcome of budget and specifically on indirect taxes side.

General / Economy –

• The last Budget before general elections 2024
• India’s real GDP projected to grow at 7.3 percent in FY 2023-24
• Fiscal deficit in 2024-25 is estimated to be 5.1 percent of GDP
• Capital expenditure outlay for the next year is being increased by 11.1 percent to Rs 11,11,111 crore, which would be 3.4 percent of the GDP
• Indian economy has demonstrated resilience and maintained healthy macro-economic fundamentals, despite global economic challenges.
• All parts of country becoming active participants in economic growth
• As per the IMF, India is likely to become the third-largest economy in 2027 (in USD at market exchange rate) and it also estimated that India’s contribution to global growth will rise by 200 basis points in 5 years.
• Strong growth in economic activity has imparted buoyancy to revenue collections and pointed out that GST collection stood at Rs. 1.65 lakh crore in December 2023.This is the seventh-time that gross GST revenues have crossed Rs. 1.6 lakh crore benchmark.
• The fiscal deficit in 2024-25 is estimated to be 5.1 percent of GDP.
• Proactive inflation management.
• Contributors to Central Revenue :
  • Income Tax 19%
  • Corporation Tax 17%
  • GST 18%
  • Union Excise Duties 5%
  • Customs 4%
  • Non-tax receipts and others 37%

Direct Taxation –

• No change in tax rates or slabs. Same rates retained.
• Long outstanding demands to be withdrawn up to Rs. 25,000/- pertaining to the period up to FY 2009-10 and demands up to Rs. 10,000/- pertaining to FY 2010-11 to 2014-15.
• To provide continuity in taxation, certain tax benefits to Start-Ups and investments made by sovereign wealth or pension funds and also tax exemptions on certain income of some IFC units have been extended by one year up to 31^st March, 2025.

Indirect Taxation –

• Deepening and widening of tax base via GST
• Average monthly gross GST collection doubled to Rs. 1.66 lakh crores in FY 2024
• Increase in tax buoyancy of state revenue from 0.72 in 2012 to 2016 to 1.22 in post GST period of 2017 to 2023.
• Implementation of GST led to reduction of logistics cost and overall reduction in prices of most goods and services.
• Import release time has been reduced drastically since 2019.
• No change to tax rates for indirect taxation for now
• Few changes in GST Act proposed 

Key changes in GST –

• Definition of “Input Service Distributor under Section 2(61) is being amended. Accordingly,

“Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;

• The manner of distribution of credit by an ISD under Section 20 is being substituted to be as follows:

“20. (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of Section 9, for or on behalf of distinct persons referred to in Section 25, shall be required to be registered as Input Service Distributor under clause (viii) of Section 24 and shall distribute the input tax credit in respect of such invoices.

(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-Section (3) or sub-section (4) of Section 9 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.

(3) The credit of central tax shall be distributed as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit, in such manner as may be prescribed.”

• Insertion of a New Section 122A of the CGST Act, 2017 providing penalty for failure to register certain machines used in manufacture of goods as per special procedure

“122A. (1) Notwithstanding anything contained in this Act, where any person, who is engaged in the manufacture of goods in respect of which any special procedure relating to registration of machines has been notified under Section 148, acts in contravention of the said special procedure, he shall, in addition to any penalty that is paid or is payable by him under Chapter XV or any other provisions of this Chapter, be liable to pay a penalty equal to an amount of one lakh rupees for every machine not so registered.

(2) In addition to the penalty under sub-section (1), every machine not so registered shall be liable for seizure and confiscation:

Provided that such machine shall not be confiscated where––

(a) the penalty so imposed is paid, and

(b) the registration of such machine is made in accordance with the special procedure within three days of the receipt of communication of the order of penalty.”

Note: The amendments shall be effective after enactment of the Finance Bill, 2024. 

Conclusion: The Interim Union Budget for FY 2024-25 reflects a cautious approach, emphasizing stability and continuity. The economic outlook, revenue projections, and taxation policies are instrumental in navigating the challenges ahead. Understanding the key changes in direct and indirect taxation, particularly in the GST domain, is crucial for businesses and individuals alike. Stay informed for a proactive response to the evolving economic landscape.

Stay updated with the latest fiscal developments and their implications.