GST Reform 2025: What MSMEs and Manufacturing Businesses Need to Know
- September 5, 2025
- Posted by: demanzo
- Category: Blog
The GST Council announced significant changes to India’s tax structure on 3rd September 2025. These reforms will be rolled out from 22nd September 2025, just in time for the festive season. For MSMEs and manufacturing businesses, this shift represents an opportunity to simplify compliance, reduce costs, and unlock new growth potential.
Key Changes in GST Structure
| Change | Details |
| Simplified Rate System | Transition to two main rates – 5% and 18% (replacing the old multi-slab system). |
| Luxury/Sin Goods | 40% GST on goods like tobacco, aerated drinks, and luxury cars. |
| Nil Slab Expansion | Essentials like bread, school stationery (erasers, pencils), and health & life insurance are now GST‑free. |
| Textile Duty Correction | Inverted duty structure fixed – raw materials for textiles now at 5%, aligning with finished goods. |
| Export Refund Threshold Removed | The threshold limit for GST refunds on exports has been removed, enabling small businesses and MSMEs to access faster refunds and expand international reach. |
What This Means for MSMEs and Manufacturers
1. Easier Compliance & Faster Registration
A new simplified GST registration scheme allows low-risk businesses (or those not claiming more than ₹2.5 lakh ITC per month) to get registered in just 3 days. This directly reduces compliance pressure on MSMEs.
2. Lower Cost of Raw Materials
Many raw materials used in MSMEs—particularly in handicrafts, textiles, construction, fertilizers, and agri-based industries—will now attract lower GST. This creates opportunities to improve margins or pass cost savings to customers.
3. Boost in Demand
With lower GST rates on essentials and consumer goods, customers will have more purchasing power. This demand push is expected to benefit MSMEs and manufacturers across sectors, especially those supplying consumer products and intermediate goods.
4. Stronger International Reach Through Export Refunds
By removing the threshold limit for export-related GST refunds, MSMEs and small businesses can claim refunds more efficiently. This boosts working capital, encourages cross-border trade, and helps Indian businesses expand globally.
Visual Snapshot of Impact
| Area | Old Regime | New Regime | MSME Impact |
| GST Rate Slabs | 5%, 12%, 18%, 28% | 5% and 18% | Simpler billing & compliance |
| Textile Raw Materials | 12% | 5% | Lower input cost, improved competitiveness |
| Registration Timeline | 7–15 days | 3 days | Faster onboarding & quicker market entry |
| Essential Goods (bread, stationery, insurance) | 5–12% | Nil | Higher demand, cost savings for consumers |
| Export Refunds | Threshold of 1000 rs | No threshold | Faster refunds, stronger global competitiveness |
Conclusion
The GST reform is more than a tax change—it’s a growth catalyst for MSMEs and manufacturers. Reduced costs, simpler compliance, better access to export refunds, and higher demand will strengthen the backbone of India’s economy.
At ExpandX, we partner with businesses to navigate such reforms effectively. With tools like TejoERP, you can seamlessly adapt your operations—ensuring compliance, improving efficiency, and capitalizing on new opportunities.