**Executive Summary: GST Rationalisation to Enhance Competitiveness and Support MSMEs**
The Government of India, through the Ministry of Commerce and Industry, has implemented a series of GST rationalisation measures effective September 4, 2025, designed to lower costs, correct duty distortions, and bolster competitiveness across various sectors. A key component of this initiative is the elimination of the value threshold for GST refunds on low-value e-commerce exports, addressing a long-standing concern for small exporters. This change amends Section 54(14) of the CGST Act, 2017, enabling refunds for exports made with tax payment regardless of consignment value, thereby simplifying procedures and improving cash flow for MSMEs, particularly those utilizing courier or postal services.
The rationalisation includes GST rate reductions in sectors such as paper, leather, wood, handicrafts, commercial vehicles, tractors, food processing, textiles, toys, and packaging materials. Specific examples include GST cuts on paper packaging, textiles, leather, and wood (from 12-18% to 5%), and on trucks/delivery vans (from 28% to 18%). These reductions aim to lower production and logistics costs, improve working capital, and enhance export competitiveness.
The policy also addresses inverted duty structures in sectors like textiles and food processing and promotes sustainable practices through reduced GST on eco-friendly products like bamboo and jute boards. These changes are expected to ease liquidity pressures, strengthen supply chains, and reduce inflationary pressures on consumers.
Industry stakeholders have welcomed these reforms, anticipating benefits such as faster export refunds, provisional relief under the inverted duty structure, and overall rationalisation of rates. The initiative supports the "Vocal for Local" campaign and aims to establish India as a global hub in sectors like textiles, food processing, and handicrafts.
The Commerce Secretary has emphasized the role of these measures in strengthening India's manufacturing base, empowering MSMEs, and enhancing the competitiveness of Indian goods in both domestic and international markets, reinforcing the vision of an Atmanirbhar Bharat.
[Release ID: 2163839; disseminated by PIB Delhi at 7:17 PM on September 4, 2025. Contact: Abhishek Dayal, Abhijith Narayana, Shabbir Azad.]
Key Entities Referenced
Goods and Services Tax: A comprehensive indirect tax on manufacturing, sale, and consumption of goods and services throughout India.
MSMEs: Micro, Small and Medium Enterprises, a sector of the Indian economy.
GST Council: A constitutional body responsible for making recommendations on GST-related issues in India.
Directorate General of Foreign Trade: A department of the Ministry of Commerce and Industry in India responsible for formulating and implementing foreign trade policy.
Central Goods and Services Tax Act, 2017: The main legislation governing the Goods and Services Tax (GST) in India.
Atmanirbhar Bharat: A vision of making India self-reliant.
Ministry of Commerce and Industry: The Indian government ministry responsible for international trade, industrial policy, and promotion of industries.
Delhi: A city and union territory of India
Ministry of Commerce & Industry
GST Rationalisation for a Competitive Economy,
Thriving MSMEs, and Consumer Welfare
GST Refunds Made Easier for Low-Value E-
Commerce Exports
GST cuts lower input costs, ease working capital
pressures, and boost MSME and manufacturing
competitiveness
Rationalisation addresses inverted duty structures,
strengthens key sectors, and promotes India as a
global hub in textiles, food processing, and
handicrafts
Posted On: 04 SEP 2025 7:17PM by PIB Delhi
The Government of India has unveiled a set of GST rate rationalisation measures aimed at lowering costs,
addressing duty-related distortions, and boosting competitiveness across diverse sectors such as paper, leather,
wood, handicrafts, commercial vehicles, tractors, food processing, textiles, toys, and packaging materials.
In what comes as a relief to e-commerce exporters, the GST Council has approved DGFT’s proposal (OM
dated 8 May 2025) to eliminate the value threshold for GST refunds on low-value consignments. Following
Annexure-V, Para 3 of the Press Note from the 56th GST Council meeting, Section 54(14) of the CGST Act,
2017 will be amended to allow refunds for exports made with payment of tax, regardless of value. This long-
awaited reform addresses the concerns of small exporters, particularly those shipping through courier or postal
services, and is expected to greatly simplify procedures and facilitate low-value e-commerce exports.
The removal of the value threshold for GST refunds will significantly benefit small and e-commerce exporters
by making even low-value shipments eligible for refunds. This will improve cash flow, reduce working
capital constraints, simplify compliance, and streamline refund procedures, particularly for consignments
shipped via courier or postal services. As a result, MSMEs and small sellers can participate more effectively
in international trade, boosting the growth of low-value e-commerce exports.
Industry bodies have welcomed the reforms, emphasising that measures such as faster export refunds,
provisional relief under the inverted duty structure, and rationalisation of rates across key sectors will ease
liquidity pressures, reduce working capital blockages, and strengthen supply chains. These steps are expected
to boost manufacturing, support MSMEs, enhance export competitiveness, and ensure cost benefits are passed
on to consumerKey Takeaways from GST Rationalisation for Exporters
1. Lower Costs & Global Competitiveness: GST cuts—e.g., paper packaging, textiles, leather, and
wood from 12–18% to 5%—lower production costs, enabling exporters to offer more competitive
prices.
2. Boost to MSMEs & Export-Oriented Sectors: Faster refunds and rate rationalisation across
textiles, handicrafts, leather, food processing, and toys support MSMEs and high-demand export
sectors.
3. Efficient Supply Chains & Logistics: GST on trucks and delivery vans reduced from 28% to
18%, and lower GST on packaging materials, reduces freight and logistics costs, enhancing
competitiveness.
4. Support for Innovation & New Products: GST on toys and sports goods cut from 12% to 5%,
incentivising domestic production, countering cheap imports, and tapping rising global demand.
5. Sustainable & Structured Growth: Correction of inverted duty structures in textiles and food
processing, along with reduced GST on eco-friendly products (bamboo, bagasse, jute boards),
ensures smoother refunds, better cash flows, and alignment with global sustainability standards.
The rationalisation of GST is expected to lower input costs for MSMEs and exporters, reduce inflationary
pressures on consumers, and correct structural anomalies such as inverted duty structures. By easing liquidity
constraints and streamlining refund processes, the reforms will unlock working capital, strengthen supply
chains, and enhance the overall competitiveness of Indian industry. These measures will also promote ‘Vocal
for Local’, bolster domestic manufacturing, and support India’s ambition to emerge as a global hub in sectors
such as textiles, tractors, food processing, auto components, and handicrafts, while ensuring that the cost
benefits are ultimately passed on to consumers.
The Commerce Secretary welcomed the rationalisation of GST rates, describing it as a decisive step in
strengthening India’s manufacturing base, empowering MSMEs, and enhancing the competitiveness of Indian
goods in domestic and international markets. He noted that the reform reinforces the vision of building an
Atmanirbhar Bharat while delivering concrete benefits to producers, traders, and exporters across the country.
***
Abhishek Dayal/ Abhijith Narayana/ Shabbir Azad
(Release ID: 2163839)