GST Council Plans to Cut Tax Slabs, Approves Fast-Track MSME Registrations & Auto Refunds for Exporters
Key Highlights
- MSME registration time reduced from 30 days to just 3 days
- Automated GST refunds for exporters cleared
- Proposal to halve GST tax brackets under review
- Potential relief for 8 major sectors including textiles, auto, health
- Opposition from several states expected over revenue loss
Read : Big Story: GST Changes May Cut Prices of Daily-Use Items — Middle Class Could Get Big Relief
What the GST Council Has Approved So Far
Sources confirm that the Goods and Services Tax (GST) Council, in its ongoing two-day meeting, has approved multiple measures aimed at easing compliance for businesses, particularly for:
- MSMEs (Micro, Small, and Medium Enterprises)
- Registration time cut from 30 days to 3 days
- Start-ups
- Faster onboarding under the GST regime
- Exporters
- Proposal for automated GST refunds approved, reducing delays and manual intervention
GST Slab Rationalisation Under Review
One of the headline agenda items for the meeting is a rationalisation of the existing GST tax structure, which currently has four slabs:
- 5%
- 12%
- 18%
- 28%
The government is considering a consolidation of these slabs to reduce complexity and improve compliance.
Proposed Changes:
- 90% of goods in the 28% bracket may move to 18%
- Many items in the 12% bracket could drop to 5%
- Expected revenue loss: ₹50,000 crore
- Goal: Boost domestic consumption and manufacturing
Sectors Likely to Benefit
According to sources, eight key sectors are expected to see the most benefit:
- Textiles
- Fertiliser
- Renewable Energy
- Automotive
- Handicrafts
- Agriculture
- Health
- Insurance
Additionally, certain services such as life and health insurance, currently taxed at 18%, may be exempted from GST.
Luxury Items Still Taxed Heavily
Despite the rationalisation, ‘sin goods’ like:
- Tobacco
- High-end cars
- Liquor
…will continue to attract higher taxes, potentially with a new Health Cess or Green Energy Cess as replacements for the expiring Compensation Cess.
Read : India Plans Higher GST on Luxury EVs in Blow to Tesla, BMW, Mercedes
Revenue Concerns and State Opposition
The ₹50,000 crore expected revenue loss has triggered concerns, especially among non-BJP ruled states. States like:
- Tamil Nadu
- West Bengal
…are expected to oppose the changes unless compensation mechanisms are put in place. These states argue that such a drastic reduction could hurt their financial health, especially with upcoming elections.
Why the Rationalisation Now?
Government sources cite uneven revenue collection across existing slabs over the past 8 years as a major reason for the overhaul.
Expected outcomes of rationalisation include:
- Lower prices for daily-use and aspirational goods
- Increased consumption among middle-class households
- Higher production by manufacturers
- Boost to job creation in labour-intensive sectors like auto and electronics.
Offsetting Global Trade Pressures
The GST revisions also aim to counteract external trade challenges, such as:
- 50% tariff hikes on Indian exports to the US
- Estimated impact: $48 billion in affected exports
By stimulating domestic demand, the government hopes to cushion these international blows.
What’s Next?
The GST Council is expected to finalize consensus on slab rationalisation in the coming sessions. Watch for:
- Pushback from opposition-led states
- Final list of items moved between tax brackets
- Clarity on exemptions and cess structures
The GST Council’s decisions signal a major shift towards simplification and pro-business reforms in India’s indirect tax system. While businesses and consumers may benefit in the short term, the real challenge lies in balancing fiscal sustainability with growth goals.
Also Read : GST Council Meet: What May Get Cheaper or Costlier Under New Tax Slabs
