Will the GST Rate Cut Enhance MSMEs and Exports?

New Delhi, Sep 5 (NationPress) The government has taken a significant step by lowering GST rates across various industries including leather, footwear, paper, textiles, handicrafts, toys, agro-processing, and logistics. This move aims to reduce compliance costs, enhance affordability for consumers, and improve margins for MSMEs, as stated by official sources.

These changes not only facilitate a more manageable cost of doing business but also align with national objectives of fostering exports, supporting artisans and farmers, and promoting sustainable manufacturing practices. Together, these reforms are set to reinforce India's growth trajectory by establishing a more efficient, inclusive, and globally competitive tax framework, as per the official statement.

The reduction in GST from 12% to 5% is expected to significantly benefit the leather and footwear sector, a major employer in India with a robust export base. This GST rationalization alleviates the financial burden on manufacturers and increases product accessibility for consumers, thereby enhancing the global competitiveness of Indian footwear and leather exports.

The e-commerce sector, among the fastest-growing, relies heavily on cost-effective packaging and logistics. The GST cuts in this domain will lower expenses for both businesses and consumers. Items like packing paper, cases, cartons, and paper pulp moulded trays will now be taxed at just 5%, effectively reducing packaging and shipping costs per order.

With a reduction in GST on trucks and delivery vans from 28% to 18%, freight rates per tonne-km will drop, thereby enhancing the efficiency of last-mile deliveries. Trucks are the backbone of India's logistics network, carrying 65% to 70% of goods traffic. Cheaper trucks will directly contribute to lower logistics costs, improving export competitiveness. This cumulative effect bolsters logistics, warehousing, and online retail ecosystems, enhancing India's standing in global supply chains.

Agro-based and eco-friendly wood substitutes will also benefit from reduced taxation at 5%, promoting sustainable manufacturing and boosting MSME competitiveness.

The handicrafts sector, essential for artisans and export growth, will experience advantages from the tax rationalization, making traditional goods more affordable and globally competitive with a GST reduction from 12% to 5%.

Agro-processing industries are set to gain from lowered GST, enhancing cold storage capabilities and reducing food waste. The GST reduction on many food items to 5% or zero strengthens the entire food processing value chain, benefiting farmers, MSMEs, retailers, and exporters alike.

Similarly, the GST rationalization in textiles addresses structural issues, decreases costs, stimulates demand, supports exports, and sustains jobs. It will bolster the entire textile value chain from fiber to garment by minimizing cost imbalances. The GST cut to 5% will alleviate expenses at the yarn/fabric stage, improving garment affordability, reviving retail demand, and enhancing export competitiveness.

The toy industry, pivotal for child development and MSME production, will also gain from the GST rate reduction from 12% to 5%, according to the statement.