New Delhi: In a significant move aimed at easing the compliance burden on businesses and promoting economic growth, the Goods and Services Tax (GST) Council approved several measures during the opening day of its two-day meeting. Sources close to the discussions indicated that the Council has cleared proposals to streamline registration processes for micro, small, and medium enterprises (MSMEs) and start-ups, as well as to introduce automated refund mechanisms for exporters.
The Council focused on the rationalization of GST slabs, a major agenda item designed to simplify the tax structure and stimulate consumption. The government is considering reducing the current four-tier system 5%, 12%, 18%, and 28% by cutting tax brackets nearly in half. Under the proposed plan, about 90% of goods currently in the 28% bracket would move to the 18% slab, while a significant portion of items in the 12% bracket would be shifted to the 5% category. Economists predict that these changes could enhance middle-class consumption and offset an estimated revenue shortfall of Rs 50,000 crore.
Certain high-end items, however, will continue to attract higher levies. Luxury goods, including tobacco, premium automobiles, and liquor, are set to retain their “sin goods” classification, and may now be subjected to a Health Cess or a Green Energy Cess. Additionally, proposals to exempt life and health insurance premiums from GST were discussed, as these currently carry an 18% tax, a move expected to provide relief to policyholders and promote insurance penetration.
The Council also approved measures to expedite registration for MSMEs and start-ups, reducing the process from 30 days to a mere three days. In parallel, exporters will benefit from automated GST refunds, which aim to streamline operations and improve liquidity for businesses engaged in cross-border trade.
The decisions taken by the GST Council reflect a dual focus: simplifying compliance for businesses while stimulating domestic consumption. Analysts say the reforms could create a more business-friendly environment, especially for small enterprises and start-ups, while ensuring that the government continues to secure revenues from high-end and luxury sectors.
With the two-day session underway, observers anticipate further announcements on GST rationalization, with hopes that these changes will mark a turning point in India’s indirect tax framework.