In a major move to simplify India’s tax regime and boost economic activity, the Goods and Services Tax (GST) Council has approved several reforms aimed at easing compliance and rationalising tax slabs. Key among the reforms is the reduction of registration time for micro, small, and medium enterprises (MSMEs) and start-ups—from 30 days to just three. The Council also cleared a proposal to automate GST refunds for exporters, a long-pending demand from industry bodies.

The two-day meeting of the Council began Wednesday, with tax slab rationalisation as its top agenda. Currently, GST has four tax brackets—5%, 12%, 18%, and 28%. The Council is considering a significant overhaul by halving these slabs. Nearly 90% of items in the 28?tegory may be moved to 18%, and many from the 12% slab to 5%. This step is expected to stimulate domestic demand and partially offset an anticipated ?50,000 crore revenue loss.

Sectors set to gain the most include textiles, automotive, renewable energy, agriculture, insurance, and health. Additionally, life and health insurance premiums, currently taxed at 18%, may be exempted from GST altogether.

To compensate for the loss of the expiring Compensation Cess, the Council is weighing the introduction of a Health Cess and a Green Energy Cess, particularly on sin goods like tobacco, luxury cars, and liquor.

The government sees these reforms as pro-middle class, aiming to make essential and aspirational items more affordable. Increased consumption is expected to boost production and job creation in labour-intensive sectors.

However, resistance is expected from opposition-ruled states like Tamil Nadu and West Bengal, which are concerned about revenue shortfalls and are likely to demand compensation from the Centre.

The Council is working to build consensus ahead of the final decision.

In a major move to simplify India’s tax regime and boost economic activity, the Goods and Services Tax (GST) Council has approved several reforms aimed at easing compliance and rationalising tax slabs. Key among the reforms is the reduction of registration time for micro, small, and medium enterprises (MSMEs) and start-ups—from 30 days to just three. The Council also cleared a proposal to automate GST refunds for exporters, a long-pending demand from industry bodies.

The two-day meeting of the Council began Wednesday, with tax slab rationalisation as its top agenda. Currently, GST has four tax brackets—5%, 12%, 18%, and 28%. The Council is considering a significant overhaul by halving these slabs. Nearly 90% of items in the 28?tegory may be moved to 18%, and many from the 12% slab to 5%. This step is expected to stimulate domestic demand and partially offset an anticipated ?50,000 crore revenue loss.

Sectors set to gain the most include textiles, automotive, renewable energy, agriculture, insurance, and health. Additionally, life and health insurance premiums, currently taxed at 18%, may be exempted from GST altogether.

To compensate for the loss of the expiring Compensation Cess, the Council is weighing the introduction of a Health Cess and a Green Energy Cess, particularly on sin goods like tobacco, luxury cars, and liquor.

The government sees these reforms as pro-middle class, aiming to make essential and aspirational items more affordable. Increased consumption is expected to boost production and job creation in labour-intensive sectors.

However, resistance is expected from opposition-ruled states like Tamil Nadu and West Bengal, which are concerned about revenue shortfalls and are likely to demand compensation from the Centre.

The Council is working to build consensus ahead of the final decision.