GST Revamp 2025: A Simpler Structure, Faster Refunds - and a Clear CFO Playbook
CFO Story Club - Editorial Desk
India’s latest Goods and Services Tax (GST) overhaul is not a mere rate rejig; it’s a deliberate stride toward a cleaner architecture and quicker cash-flow cycles. The GST Council’s September decisions converge on three policy aims:
(1) simplify the rate structure,
(2) unclog working capital via faster, system-driven refunds, and
(3) reduce friction by clarifying long-disputed rules. The broad message is unambiguous: simplify to grow.
Recently announced GST amendments of change in rates, reducing the 5 rate structure into 3 rate structure would benefit to enhance the consumption with money left with the buyers in the short term. But for sustaining the same for long term over and above the idle capacity, it may call for investment which need retaining the enhanced consumption in tact to ensure better ROI. Further few issues on ITC to be addressed to ensure that input tax paid by manufacturers is available to off set output tax liability. The proposed policy to change the levy of tax on the hands of recipient would make larger impact on the economy as it could imbalance the revenue targets of budgets of States. In addition, the recent changes made in tax structures would need proper guidance from tax regulators for availing the benefit of tax paid on stocks held on the date of implementation to arrest any loss to the traders and dealers.
Nambi Rajan N
CFO & COMPANY Secretary at The Hindu Group
What actually changed
Rate rationalisation toward “two-plus-one”: The Council endorsed a move to two principal slabs (5% and 18%) with a higher “demerit” band (40%) for select luxury/sin categories. Many essentials were cut to 5% or exempted, while several 28% items (e.g., small cars/motorcycles, cement, ACs, TVs) shifted down to 18%. Tobacco/pan masala products remain at current incidence until compensation-cess obligations are cleared.
Large basket of targeted cuts: Reductions span healthcare (life & health insurance exempt; key devices at 5%), agri inputs and irrigation, textiles (correction of the man-made fibre/yarn inverted duty), cement (28%→18%), auto parts to a uniform 18%, and numerous food staples. These are explicitly listed in the Council/PIB release and timed for implementation from 22 September 2025 (with specified exceptions).
Refunds and working capital: A system-driven, 90% provisional refund regime, extending beyond exports to inverted duty structure (IDS) cases, is to be operationalised (with administrative rollout timelines notified; sector summaries reference 1 November 2025 for the revised system). The intent is faster, risk-based releases to relieve liquidity pressure.
Clarity for services exporters: The Council recommended omitting IGST Act §13(8)(b) for “intermediary services,” aligning place of supply to the recipient’s location. This should reduce disputes and unlock export benefits for Indian service providers.
GSTAT: The appellate tribunal is to accept appeals by end-September and begin hearings by end-December 2025, offering long-awaited dispute-resolution capacity.
EV continuity: The 5% GST on EVs is retained under the new framework welcome for policy consistency - though rate asymmetries persist in the after-sales stack.
Press Information Bureau (credits)
These GST reforms are giving new direction to India on simplification, digital first and spurring demand. The move to improve GST refunds for companies facing inverted duty structures through an online process is welcome.
However, the large amounts already stuck under the inverted duty structure from past years must also be addressed. For the EV sector, accumulated GST credits over time have significantly strained working capital. Also EV sales benefit from a concessional 5% GST, repair and maintenance services attract 18% GST - creating a mismatch that discourages wider EV adoption.
A more holistic approach on GST reforms needs to align with India’s push for electric mobility, ensuring that all parts of the EV supply chain, from manufacturing to after-sales, are treated consistently and fairly. Overall a move in right direction.
Ajay Shanker, CFO at Ultraviolette
A pragmatic CFO playbook (90 days)
Re-price & re-plan
Map every SKU/service to the revised HSN rate and lock dates (22 Sep 2025 unless otherwise noted).
Refresh MRP/POS, distributor credit notes, and anti-profiteering documentation for price reductions.
Cash-flow acceleration via refunds
Segregate legacy IDS claims vs post-revamp claims.
Prepare for system driven 90% provisional refunds; align ERP to new data validations and risk flags; nominate a refund “owner” with daily MIS.
ITC housekeeping
Re-validate blocked credit lists, rate-change cut-over dates, and credit-note mechanics (post-sale discounts now require recipient ITC reversals per amended §§15/34—build this into contracts).
Run a one-time opening stock tax bridge (pre/post implementation) to avoid leakage for traders/dealers during transition (await regulator FAQs/notifications for relief mechanics).
EV sector specifics
Model after-sales margin impact from the 5% vs 18% mismatch (R&M, battery services, parts).
Consider bundled service plans and extended warranties to smooth tax incidence for customers; keep an advocacy brief ready for holistic EV-ecosystem parity.
Contracts & cross-border services
For “intermediary services,” update place-of-supply clauses (recipient location by default), export declarations, and pricing. This can improve net realisation for services exporters.
Disputes & readiness
Prioritise appeals and documentation with GSTAT timelines in mind; triage high-value legacy matters likely to benefit from clearer jurisprudence.
Board communication & scenario analysis
Present a two-scenario view: (A) demand uplift with quick pass-through, (B) muted pass-through due to competitive dynamics.
Tie capex triggers to refund velocity and inventory turns rather than headline tax cuts alone.
Bottom line for CFOs: Treat this revamp as a balance-sheet event, not just a tax note. The combination of simplified slabs, broad-based rate relief, clearer cross-border rules, GSTAT activation, and faster refunds can expand both margins and certainty if you re-price decisively, lock in refund velocity, and communicate transparently across your value chain.
References: Key decisions and timelines from official releases and expert summaries, including PIB press releases and consolidated highlights of the 56th GST Council meeting, as well as sector updates on EV taxation.