“Come September”, the iconic Hollywood classic of 1961, has found a replay in India, 64 years down the line, albeit with a tweak and in the context of the month in 2025 holding forth the promise of a transformative change in India’s Goods and Services Tax framework.
Come September 22, 2025, India will witness the next-generation GST reforms aimed at boosting the affordability for Indians. However, this would be boldly underlined by a multiplier effect on industry and trade shaken by tariffs imposed by the US Government.
Reforms To Shave Off Tariff Impact
Expectations are riding high among India’s corporate and business classes over the most ambitious overhaul of the GST since its inception in 2017, which ‘simplifies’ the tax regime. With the latest changes, the government has done away with the previous four-tier structure: 5%, 12%, 18%, and 28% — and ushered in three slabs of 5%, 18%, and 40%, with most goods categorised under the first two.
The reforms are expected to boost retail consumption and directly benefit labour-intensive industries, MSMEs and the automobile sector at a time when India’s inherently strong domestic market and buying power need a stimulus amidst global uncertainty and escalating tariff wars.
Vinod Aggarwal, Managing Director & CEO of VE Commercial Vehicles, defined the GST reform as a “very positive and pro-growth” move that will immediately lift consumer sentiment and boost demand across a broad range of sectors.
Aditi Nayar, chief economist, ICRA, agrees that the GST rationalisation is a well-timed move. “Its positive implications for consumer demand and producer sentiment will help to offset a portion of the negative impact of the evolving US ‘reciprocal tariffs on Indian goods, which rose to 50% on August 27,” says Nayar.
Exports To Benefit
This is critical for India’s exports, imports, and industrial competitiveness. These will benefit from reforms like the correction of inverted duty structures in textiles, fertilisers and renewable energy.
“This will reduce import dependence and improve the global cost competitiveness of Indian goods,” points out FICCI president Harsha Vardhan Agarwal. The GST Council has also approved the release of export refunds within seven days based on risk analysis, along with provisional refunds under the inverted duty structure for sectors such as textiles, pharma, chemicals, and fertilisers, explained president of the Federation of Indian Export Organisations (FIEO) SC Ralhan.
“These decisions ease liquidity challenges for exporters and will go a long way in reducing working capital blockages and providing timely relief to our exporters,” Ralhan said.
The MSME-driven and labour-intensive sectors, such as textiles, handicrafts, leather, and engineering goods, are bracing for a harder impact from US tariffs. The reforms will enable them to benefit from the lower GST rates and the simplified GST registration scheme with automated approval within three days.
“These measures are progressive as they will ease compliance and strengthen India’s textile and apparel value chain,” said Sudhir Sekhri, chairman of Apparel Export Promotion Council, who views these as decisive steps towards enhancing export competitiveness.
In the auto component sector, too, the GST Council’s approval for faster export refund claims through ICEGATE for smaller exporters means support in clearing pending shipping bills and significant ease of liquidity constraints, according to Shradha Suri Marwah, President, Automotive Component Manufacturers Association of India.
Boost To Competitiveness
An important requirement for the Indian industry amid the global trade wars is manufacturing competitiveness. High GST rates have, so far, kept capex costs for manufacturing and MSMEs high, pointed out Nomura experts Umesh Raut and Aritra Banerjee.
They said the reduction in GST from 28% to 18% provides substantial relief as it will reduce machinery costs across multiple sectors, encourage modernisation, boost capex in industrial machinery, and improve the competitiveness of Indian manufacturing.
The rationalisation of GST to a uniform 18% across all auto components is expected to strengthen the competitiveness and resilience of India’s USD 80.2 billion auto component industry, Shradha Suri Marwah said. The GST reforms will curb the grey market, encourage the use of quality compliant components, ease compliance and support MSMEs,” she said.
Auto Sector To Roll Out GST Cuts
India’s automobile industry has long sought rationalisation and simplification of GST to push affordability, stronger demand in the high-volume segment, and an overall boost to the automotive eco-system. It is now preparing to pass on the complete benefit of the recent GST rate reduction on passenger vehicles to its customers, effective September 22.
“Notably, 60% of our ICE (internal combustion engine) portfolio will now fall under the 18% slab rate. The rest of them will be taxed at 40%,” said Unsoo Kim, Managing Director, Hyundai Motor India. The company could offer a price reduction of up to Rs 2.4 lakh.
Mahindra & Mahindra, too, will pass on the full GST benefits of up to Rs 1.56 lakh to customers across its entire ICE SUV portfolio. Jeep India’s full advantage of the recently announced GST reforms to its customers ranges from Rs 1.26 lakh to Rs 4.8 lakh, depending on the model and variant.
Kuldip Singh Rathee, Chairman and Managing Director, ASK Automotive, said: “The reduction of GST on entry-level vehicles from 28% to 18% will also provide much-needed relief to an industry that has been struggling for the last few years. “The measures taken for the automobile sector, especially for small cars and two-wheelers up to the 350CC segment, will accelerate sales among first-time buyers and middle-income families,” he said.
The reduction of GST on commercial vehicles, such as buses and trucks, from 28% to 18% has wider implications in terms of reducing logistics costs. It will also encourage much-needed fleet modernisation by state transport corporations and private operators, Vinod Aggarwal of VE Commercial Vehicles said.
