[Opinion] Union Budget 2025 | Insights on the Key Indirect Tax Proposals

Rajat Chhabra & Shashank Kumar Singh – [2025] 171 taxmann.com 85 (Article)

The Union Budget proposals 2025 announced recently come at the backdrop of India’s sustained growth and inclusive development. A comprehensive roadmap for the pursuit of its vision covers four powerful engines viz., agriculture, MSME, Investment and Exports. The Budget aims to initiate transformative reforms across six domains viz., taxation, power sector, urban development, mining, financial sector and regulatory reforms. During next five years, these are expected to augment India’s growth potential and global competitiveness.

A key highlight of the Budget is its emphasis on job creation and skill development to harness the potential of India’s youth. Another key highlight to set-up a high-level committee for regulatory reforms to strengthen trust-based economic governance and take transformational measures to enhance ‘ease of doing business’ is indeed a welcome measure.

Notably, few key tax proposals have been put forth by the Hon’ble Finance Minister in the Union Budget 2025. This piece aims at dealing with and expounding on the key indirect tax proposals as unveiled vide the Finance Bill, 2025:

Amendment in Section 17(5)(d) of the CGST Act

Union Budget has followed up on the 55th GST Council meeting and proposed to amend Section 17(5)(d) to substitute the words “plant or machinery” with the words “plant and machinery” w.e.f. July 1, 2017.

This is an attempt to retroactively amend Section 17(5)(d) of the CGST Act to nullify Hon’ble Supreme Court’s decision in Safari Retreats (P.) Ltd. v. Chief Commissioner of CGST [2019] 105 taxmann.com 324/74 GST 500/25 GSTL 341 (Orissa). Recently, vide the said judgment, the Hon’ble Apex Court had distinguished the two phrases viz., ‘plant and machinery’ and ‘plant or machinery’ as used in Section 17(5) and had pronounced that ITC would be permissible on construction activities qua buildings/civil structure, treating them to be a ‘plant’, subject to fulfilment of the functionality test. This proposal is in line with the recommendations of the GST Council Meeting in its 55th Meeting held recently.

The said retroactive amendment hasn’t really gone with the industry at large and as such possibility of challenging it before the Writ Courts cannot be ruled out.

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