This round of tax reforms can be termed 'MGGA - Making GST Great Again'

To ensure the 56th GST Council is remembered as the most transformative since 2017, the proposed changes must be implemented in spirit, and what must happen next for promises to become policy

In a country accustomed to incrementalism, the 56th meeting of the GST Council may go down as a rare moment of policy audacity. Not merely for the headline rate tweaks, but for an unmistakable pivot to fixing the plumbing of India’s indirect tax system: registrations, refunds, and the daily frictions that define how business actually happens.

 

Credit is due to the ministers, officers and the Council for the speed with which they worked to deliver this landmark decision. The distance from the Prime Minister’s signal on August 15, 2025, to the Council’s deliberations on September 3, 2025, was covered in 19 days, a remarkably fast turnaround for nationwide tax administration. Several measures will take effect from Navratri on September 22, 2025, a pace that raises expectations and the bar on delivery.

 

The structural shift India has been waiting for

 

For years, taxpayers have complained that GST’s weakest links were not the law but the levers: officer discretion at the points of entry (registration) and exit (refunds). With the Council’s decisions, the centre of gravity shifts from human discretion to system design.

 

Refunds that flow by default, not by favour

 

Export and inverted duty refunds will be processed on a straight-through basis. Ninety per cent of the amount will be released provisionally within seven days based on risk rating. This shift will unlock working capital, shrink litigation and restore confidence in the refund mechanism that underpins an exports-based economy. The same approach will apply to inverted duty structure claims. That is a brave call. Segments such as agricultural implements, where inputs are taxed at 18 per cent and outputs at 5 per cent, are prone to accumulation and will finally see timely refunds.

 

Registration in days, not months

 

Deemed registration will be granted within three days for applicants whose expected utilisation of input tax credit is up to Rs 2.5 lakh a month. In practice, that threshold captures a small business with about Rs 1.66 crore in annual turnover in the 18 per cent slab. A large swathe of MSMEs can now formalise quickly and reliably by global standards. In effect, one can now be GST ready in three days.

 

Classification clarity, not coercion

 

By aligning similar items into the same GST slab, the Council has effectively removed the scope for classification disputes to trigger investigation, notices or scrutiny. For consumers and businesses this means less adversarial scrutiny and more predictability. Consider a Haldiram counter, where sweets earlier at 5 per cent, namkeen at 12 per cent and cakes at 18 per cent now all sit at 5 per cent. Such change reduces compliance anxiety and litigation risk, especially for MSMEs.

 

E-commerce: simplified registration for small suppliers

 

Until now, small suppliers selling through e-commerce operators such as Amazon and Flipkart were compelled to take separate GST registrations at fulfilment centres in every state, even when they neither handled the logistics or shipment of the product. It was a redundant and expensive compliance requirement. The new simplified registration scheme removes that burden, a welcome, business-friendly boost to the e-commerce sector and the millions of small sellers it enables.

 

Food delivery becomes dearer

 

Local food and grocery delivery services supplied via e-commerce operators, where the underlying supplier is not liable to register, will be taxed at 18 per cent. In practical terms, food delivery will be dearer by 18 per cent. Platforms may shift from engaging individual local delivery partners to contracting manpower service providers who will bill at 18 per cent with GST and make input credit available to the platforms. This shift may disrupt the current gig ecosystem, where many riders worked on flexible terms and received direct payments, as they would now perform the same work through manpower aggregators who may charge a commission or impose work norms.

 

Moving from cess to a 40% slab restores fungibility

 

Aerated drinks and certain motor vehicles move from compensation cess to a unified 40 per cent GST rate. While the effective tax incidence may remain similar in many cases, this is a welcome structural shift because cess credit lacked fungibility, so value addition attributable to cess became a cost for businesses. With the levy merged into GST, the erstwhile cess component can now be offset through regular GST input credit, improving cash flows and margins.

 

What still needs fixing

 

Reform is a relay, not a sprint. Two gaps stand out. The first concerns return filing. The practical implementation of invoice matching systems (IMS) remains unsettled, and lakhs of notices for reconciliation gaps, many of them readily reconcilable, continue to drain capacity. This must be cleaned up with clear, uniform rules and system-led reconciliation. The operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT) is a welcome step toward resolving these disputes at scale.

 

The second concerns roadside enforcement. It is an operational issue that requires clear guidelines so that transport trucks are not stopped or detained for minor compliance or documentation gaps. Interventions should be used only when there is credible risk of genuine evasion. With rate rationalisation and the restoration of full fungibility of credit, trade and industry have little reason to under-invoice or move goods without invoices. Enforcement must be risk-based, time bound, and transparent.

 

Transitional adjustments in price and inventory

 

For non-tobacco products, the end of compensation cess from September 22 will strand accumulated cess credit in inventory and convert it into a direct cost. The effect will be most acute in the automobile sector, where dealers and manufacturers may be holding significant stock that carries cess input credits. Companies will either absorb the hit in margins or reprice to reflect the change.

 

Pricing mechanics will also require prompt guidance under the Legal Metrology (Packaged Commodities) Rules. Companies may need clear instructions on when and how maximum retail prices may be revised after a tax rate change, including the permissible method of relabelling, the time window for compliance, the disclosures to consumers, and the treatment of stock already in trade. Clear rules will prevent a conflict between consumer protection and tax laws.

 

Implementation is the whole game

 

Let’s be practical: the proof of the pudding is in the clicking, so to speak. It is not clear if officers must still click a button anywhere in the system to approve a provisional refund or to grant a three-day registration. If so, the reform will not rise above discretion and the policy will remain a promise rather than a practice.

Success now rests squarely with GSTN and its technology partner, Infosys. The mandate is not simply to code features, but to redesign flows: straight-through processing by default, exception handling that is auditable, and risk engines that are explainable. Build guardrails for officers, not gates for taxpayers.

 

The opportunity and the obligation

 

If these changes land as designed, the 56th GST Council will be remembered not only for making some goods cheaper but for making GST work in practice. Faster refunds will release working capital and ease the need for borrowing and quicker registrations will speed formalisation. These together will set the conditions for growth today and resilience tomorrow.

 

But reform by press release or tweet is not a reform. It is the notification, the system, and ultimately the lived experience of a taxpayer that will decide whether this Council was truly transformative. There is no doubt that GST was made great again today, not by slogan but by implementation.

 

(The writer is a former IRS officer and currently serves as vice president (indirect tax) at Reliance Retail Ltd. The views expressed are personal.)