By admin 
NEW DELHI, Dec 29: Simplification of direct and indirect tax policies will be the key focus area for the government in the new year after initiating the review of the six-decade-old Income Tax Act and rationalizing the GST rate in 2024.
With monthly gross GST collections stabilizing at around Rs 1.8 lakh crore and gross direct tax collections rising steadily at 20 per cent, efforts to ease compliance burden on both individuals and businesses will gain momentum.
On the GST front, individuals are waiting for a tax cut on life and health insurance premiums, which will bring down the cost of insurance, while businesses are waiting for the introduction of the GST Tribunal for faster dispute resolution.
Also, work on rationalizing GST rates and slabs has been initiated with a group of ministers (GoM) deliberating on the changes but a final decision is expected only by the GST council comprising the Center and ministers of State Finance.
Currently, the GST is a four-tiered tax structure, with slabs of 5 percent, 12 percent, 18 percent and 28 percent. Under GST, essential items are exempted or taxed at the lowest slab, while luxury and substandard items attract the highest slab.
Luxury goods such as cars, washing machines and luxury goods such as sparkling water and tobacco products attract tax on top of the highest slab of 28 percent.
In the area of income tax, the government has initiated a revision of the Income Tax Act, 1961, to make it simpler and easier to understand. Amendments to the IT Act, which will remove outdated provisions and make them succinct, are likely to be tabled in Parliament as early as the budget session.
Moreover, coordination among law enforcement agencies to combat tax evasion and strengthen anti-money laundering provisions over the years has earned India the highest rating from global financial watchdog Financial Action Task Force (FATF) in 2024.
India has been placed in the “regular follow-up” category – which is the highest assessment category by the FATF for India’s efforts to implement measures to tackle illicit financing, including money laundering and terrorist financing. Britain, France and Italy, apart from India, are among the only G-20 countries placed in this category.
On the GST front, tax officials have been grappling with fake registration for the sole purpose of fraudulently claiming input tax credit (ITC) and cheating the exchequer.
According to information shared with Parliament, between April and October 2024, GST officials detected cases of evasion of input tax credits worth Rs 35,132 crore by 17,818 fake companies and arrested 69 persons.
To check fake entities, the GST Council, comprising the Center and states, has already introduced biometric authentication for certain suspected companies wherein the person applying for GST registration will be asked to go to an Aadhaar center to get his biometric to have data verified.
However, as business and industry face difficulties in obtaining registration, the GST Council at its meeting on December 21 decided to streamline the GST registration process and directed the tax officials to work on its implementation.
The Goods and Services Tax (GST) authorities have so far been using OTP-based Aadhaar authentication to establish the identity of applicants seeking registration.
AMRG & Associates Senior Partner Rajat Mohan said continued emphasis on rationalizing tax rates, reducing litigation through a centralized appellate court and leveraging data analytics will be key.
The introduction of the Invoice Matching System (IMS) by 2025 will increase the transparency and accuracy of GST returns by automating invoice reconciliation and reducing fraudulent ITC claims.
“However, the transition may pose challenges for businesses, especially small taxpayers, who may face higher compliance costs and technical issues,” Mohan said.
Deloitte India, Partner and Leader, Indirect Tax, Mahesh Jaising said in 2025 that the expected reforms include rationalization of GST rates, especially for the real estate and insurance sectors, as explored by the GoMs, besides operationalization of the GST Appellate Tribunal.
“Technology upgrades, such as expanded B2C e-invoicing and implementation of the recently launched Invoice Management System, indicate the government’s commitment to promoting a simplified, industry-friendly and growth-oriented tax ecosystem,” Jaising said.
Nangia Andersen LLP, Executive Director – Indirect Tax, Sivakumar Ramjee said that by 2025, the government is expected to focus on improved GST collection through GST amnesty schemes, introduce clearer rules for taxing cryptos and virtual assets, the will make GST Tribunals operational, make changes in E-way bill procedures and streamline IMS and introduce multi-factor authentication for accessing the GSTN portal as an additional security layer. (PTI)