GST Reforms: Boosting India’s MSME Sector

The Global Trade Research Initiative (GTRI) emphasized the importance of implementing crucial reforms in India’s customs duties, GST, and commerce to drive sustainable development and inclusive growth. According to GTRI, these reforms are essential as India stands at the threshold of a transformative period, necessitating comprehensive economic changes.

GTRI highlighted several key recommendations. Firstly, it advocated for simplifying India’s complex customs duty structure, which has not been reviewed in two decades and currently encompasses over 27 different duty rates and numerous duty slabs. They proposed reducing the average import tariff significantly, potentially below 10%, while ensuring essential products remain unaffected. This, they argue, would not only streamline operations but also mitigate global criticisms regarding India’s tariff policies.

Secondly, GTRI proposed substantial reforms in the GST framework, suggesting an increase in the exemption threshold from ₹40 lakh to ₹1.5 crore annual turnover for MSMEs. They reasoned that this adjustment could benefit over 80% of registered firms while simplifying compliance through invoice-matching and reducing instances of tax evasion.

Thirdly, GTRI cautioned against incentivizing low value-added electric vehicles (EVs), emphasizing the risk of increased dependence on Chinese-manufactured EVs due to their dominance in battery and component supply. They recommended a balanced approach that promotes EV adoption while safeguarding India’s domestic auto industry.

Moreover, GTRI underscored the need to bolster India’s capacity in producing key pharmaceutical ingredients domestically to reduce reliance on imports, particularly from China, which currently supplies a significant portion of India’s APIs and biosimilars.

Lastly, GTRI suggested simplifying e-commerce export regulations to stimulate exports from India, particularly for sectors like handicrafts, jewellery, and traditional products, aiming to tap into global markets more effectively.

In conclusion, GTRI’s proposals aim to position India as a resilient and globally competitive economy through strategic reforms in customs, GST, and commerce, fostering sustainable growth and economic inclusivity.