GST Reform 2025: Tax Relief Expected for MSMEs, Exporters and Consumers

Sept 3, 2025 - The Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, begun its two-day 56th meeting in New Delhi today, September 3. The meeting is expected to introduce what could be the biggest reform in the GST system in nearly a decade. The aim is to stimulate domestic consumption. It is also intended to help increase farm income and encourage self-reliance among Indian manufacturers.

According to sources, the government is likely to cut tax rates on 175 products. Sectors such as textiles, fertiliser, renewable energy, automotive, handicrafts, agriculture, health and insurance are set to benefit the most from the rate reduction. Products could include hybrid cars, air conditioners (ACs), television sets and shampoos.

Reports say the GST Council has given the nod to implement steps to lighten the load of compliance on businesses. Key measures are said to include reduction of registration time for MSMEs (medium, small and micro enterprises) and start-ups from 30 days to just three. The Council also cleared a proposal for automated GST refunds for exporters, say media reports.

The Council is set to deliberate on cutting the existing tax brackets by half. The current system has four slabs - 5%, 12%, 18% and 28%.

According to sources, GST on consumer goods such as talcum powder, toothpaste and shampoo may be reduced from 18% to 5%. This could result in a significant boost to businesses in these sectors. For air conditioners and television sets, the tax rate may be slashed from 28% to 18%, just in time for the Diwali shopping season beginning in October.

The government is also planning to reduce GST from 12% or 18% to 5% on key export items such as fertilisers, agricultural machinery, tractors and their parts. This cut may extend to the textile sector as well, aimed at providing major relief to textile manufacturers.

The proposed tax reduction is expected to revive the sale of small cars. However, for large cars (longer than 4 metres), the GST rate may increase from 28% to 40%. Additionally, items like coal and services such as betting, casinos and horse racing may also face higher tax rates.

Meanwhile, the Opposition-ruled States have demanded that all States be compensated for the revenue loss they will suffer post the implementation of the GST rehaul.

With Media Inputs

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