Trade Associations and Tax Professionals Demand for GST Reforms in Union Budget 2025

With the start of the New Year, the Union Budget 2025 approaching, trade associations and tax professionals anticipate significant changes to the GST regime. Finance Minister Nirmala Sitharaman is going to present the budget in February, and stakeholders are calling for reforms that address critical economic challenges.

Key Proposals for GST Reforms

Revisions in Late Fee and Structure of Interest

The Commercial Tax Practitioners Association has urged for a reduction in the existing 18% interest rate on late GST payments.

The association claims that this rate is disproportionately high when compared to bank interest rates, which average 10% for fixed deposits.

They propose lowering the interest rate to 12% and providing surity that businesses receive advance notice before their input tax credit (ITC) is blocked.

Revised GST Returns Provisions

Tax professionals are advocating for the introduction of a procedure that allow taxpayers to update GST returns and correct errors without having to pay penalties.

Changing the Input Tax Credit (ITC) Mechanism

The Madhya Pradesh Tax Law Bar Association emphasised the importance of revising the ITC adjustment process to boost cash flow for businesses.

• Current Mechanism: The current system prioritises IGST first, followed by CGST and SGST. This frequently ends in an SGST surplus while firms continue to owe taxes under IGST and CGST.
• Proposed Change: Businesses should be able to change ITC in any order, allowing them to utilise accrued SGST balances and minimise working capital constraints.

The association highlighted that the issue has existed since the inception of GST in 2017, leaving many businesses with huge SGST balances while still facing tax liabilities and interest payments in other areas.

Resolving ITC Mismatches

Another serious issue mentioned by the Commercial Tax Practitioners Association is the lack of mechanisms for ensuring the accuracy of ITC claims.

• Currently, any ITC mismatch is entirely the recipient’s obligation, even if the supplier is at fault.
• The association advocates establishing checks and balances to guarantee that supplier faults do not unfairly penalise recipients.

Viewpoint of Industry

Trade and tax professionals believe that streamlining GST compliance will greatly benefit businesses, particularly small and medium enterprises (SMEs). Interest rate reductions, flexible ITC adjustments, and provisions for modifying returns will all help taxpayers ease their financial and operational burden.

Expections from Union Budget 2025

The Union Budget 2025 is expected to include taxpayer friendly improvements, as recommendations from trade bodies and tax experts gain momentum.

Stakeholders hope that these improvements will simplify compliance, increase cash flow for businesses, and create a more equitable GST framework.

Conclusion

The expectations for the Union Budget 2025 reflect the general demand for a more efficient and equitable taxation system. If adopted, these reforms will not only reduce the compliance burden but also promote a growth-oriented environment for Indian enterprises.