Faster MSME Registration, Automated Export Refunds, and GST Slab Rationalisation on Agenda
New Delhi: The Goods and Services Tax (GST) Council has cleared a set of measures aimed at reducing compliance burden for businesses, particularly MSMEs and start-ups, sources said on Wednesday evening.
One of the biggest reforms approved is the reduction in GST registration time for small and medium enterprises — from the earlier 30 days to just 3 days. This move is expected to make it easier for entrepreneurs to quickly begin operations.
Additionally, the council has also approved a proposal for automated GST refunds for exporters, which will help improve cash flow and ease of doing business for the export sector.
GST Slab Rationalisation: Major Restructuring Ahead
The council began its two-day meeting today with the rationalisation of GST tax slabs as the most significant item on the agenda.
Currently, GST has four slabs – 5%, 12%, 18%, and 28%. The government is reportedly considering a plan to cut these slabs by half to simplify the structure.
Key proposals include:
- Moving 90% of goods currently taxed at 28% into the 18% bracket
- Shifting a large chunk of items from the 12% slab to the 5% slab
This restructuring is expected to boost middle-class consumption while compensating for the estimated ₹50,000 crore revenue loss through higher demand.
Luxury Goods and Sin Taxes Stay
While rationalisation will benefit common consumers, some items will continue to attract higher taxes. Products such as:
- Tobacco
- High-end cars
- Liquor
…will remain under the “sin goods” category.
To replace the expiring Compensation Cess, the government is considering imposing a Health Cess or a Green Energy Cess on these goods.
Relief for Insurance Policyholders
Another important proposal under discussion is exempting life and health insurance premiums from GST. At present, these services attract 18% tax, and removing them from the GST net could provide significant relief to policyholders.
Key Takeaway
The GST Council’s latest decisions highlight the government’s focus on simplifying tax compliance, supporting MSMEs, and boosting consumer spending. While businesses will benefit from faster registration and exporters from quicker refunds, the rationalisation of tax slabs could make everyday goods more affordable for the middle class.
The final framework on cess and tax exemptions is expected to be announced once the council concludes its two-day meeting.