The corporate sector is expressing high hopes for the revival of the economy as India approaches the Union Budget 2025, which is scheduled for February 1. Amid declining growth, industry leaders are demanding fundamental changes, as India's GDP grew by only 5.4% in the second quarter of FY 2024-25, the lowest in seven quarters. Clarity about tax deductions under the new tax regime, better support for manufacturing, and rationalisation of GST are the key areas of focus.
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GST Rationalisation
Rationalising goods and services tax (GST) rates is one of the top priorities of India's industry. Industry leaders argue that lowering GST rates on essential goods and raising rates on luxury and non-essential items could boost demand without negatively impacting the government's budget. This strategy seeks to improve the ease of doing business in India by streamlining tax categories and reducing litigation associated with tax disputes.
Some industries are seeking specific cuts; for example, the insurance industry wants the current 18% GST rate on health insurance services to be reduced. Similarly, the cement sector, which is essential for both real estate and construction, is pushing for lower rates from the current 28% to reduce construction costs.
Boosting Manufacturing
To strengthen its local manufacturing capabilities, the Indian industry is also advocating a significant increase in capital expenditure (capex). Compared to the ₹11.11 lakh crore allocated for the current fiscal, the Confederation of Indian Industry (CII) has suggested a 25% increase in capital expenditure allocation.
In addition, there are proposals for a second phase of the production-linked incentive (PLI) program that will also cover textiles and handicrafts in addition to the existing 14 industries. Additionally, since SMEs are essential to India's industrial sector, industry experts stress the need to empower them. Increasing access to reasonably priced loans and creating dedicated MSME colleges for entrepreneurship education and skill development are among the recommendations.
Clarity on Tax Deductions Under New Tax Regime
Clarity regarding tax deductions under the new tax structure implemented in previous budgets is another major area of concern. Business executives are looking for clear standards regarding the continued applicability of the standard deduction and other traditional deductions, such as deductions linked to home loans.
This clarity is important for both people and organizations to successfully organize their money. It is anticipated that streamlining tax laws and introducing precise deduction criteria will increase disposable income, further boosting spending across various industries, especially retail and consumer products.
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