Indirect Tax

The granting of export status to intermediary services would settle litigation over what qualifies as intermediary and accordingly reduce refund denials on this account. Similarly, the changes on post-sale discounts would reduce a large dispute on their allowability. With the discontinuation of the compensation cess, the original design of GST stands reinstated, which is a significant step towards a simpler and more stable tax regime.

The GST rate rationalisation is a very good move, especially in the current context of US tariffs which have caused stressed in certain sectors and the overall economy. The rate reduction from 12% to 5% and from 28% to 18% is likely to drive comsumption. In addition, consumers are likely to benefit from reduced prices of most goods due to competitive pricing.

The proposed GST rate rationalisation measure is a welcome step toward simplifying the Indirect Tax framework. By reducing the slabs and lowering rates on essential goods, the reforms are likely to have a significant impact on certain industries where rates are touted to be rationalised. The industry would need to prepare itself with impact assessments, pricing re-recalibration and impact on transition stock to ensure a smooth shift to the new regime. The messaging around the removal of the compensation cess is also encouraging, as it will simplify the tax structure, allowing flexibility to the Government to make it more rational and balanced.

This approach reflects a shift towards clarity and consistency in taxation. It can help reduce complexities that have arisen since GST implementation, minimising classification disputes, ensuring that exceptions are applied judiciously where they are truly needed. The reforms would surely bring in predictability for businesses and consumers alike, a step towards a more stable, transparent, and future-ready tax ecosystem.