I will not lie! But I was expecting something of this sort to be announced after Trump’s recent tariff bomb. But yesterday’s new GST slabs exceeded all my expectations. And it’s no surprise that as I write this editorial the equity market which opened sharply higher today is still faring in green. But then what does it mean to our MSMEs? 

If you ask me this question my first reaction perhaps will be that the most transformative change is not just about the new tax rates, it is more about the systemic simplification that accompanies them. The GST Council's decision to streamline the tax slabs from 4 to 2 (5 percent and 18 percent) directly addresses a long-standing complaint from all businesses, small or big – the confusion and compliance burden caused by a multiplicity of these rates. For a small business, this change means less time will now be spent on complicated tax filings and more time focused on what truly matters, which is, creating products, serving customers, and growing their business.

However, what excites me more is that MSMEs will now benefit from the correction of the inverted duty structure. In the past whenever I spoke to MSME owners across cities, they would complain that their working capital was locked up in unutilized Input Tax Credit because the tax on their raw materials was higher than the tax on their final product. However, the new, rationalized rates on items like man-made textiles, handicrafts, and agricultural machinery will finally correct this anomaly, which is a huge relief to small businesses working on limited capital. This will unlock vital capital, giving these businesses the much-needed liquidity to invest in new technology, hire more people, or even to expand their operations.

In addition, I must say that the reforms on registration and refunds are also nothing short of a game-changer. I believe that a government's true support for small businesses is measured by how easily they can operate and yesterday’s announcements have exhibited that the government is there to hand-hold our MSMEs in times of distress. The new simplified registration process, promising approvals for low-risk applicants in just three days, will significantly reduce the time and effort required for new ventures to formalize. Even exporters will benefit from this because the automated refund mechanism will directly enhance the ease of doing business for a sector that contributes tremendously to the GDP of our nation.

What comes across from yesterday’s GST reforms is a clear signal from our policymakers that they recognize the crucial role of MSMEs. By reducing the tax burden on everyday items, they are not only putting more money in the hands of consumers but also creating a direct stimulus for the very businesses that produce these goods. 

Isn’t it a virtuous cycle! The logic is very simple; lower taxes lead to cheaper products, which in turn boosts demand, and that demand is met by a more agile and competitive MSME sector. For the millions of entrepreneurs who power our economy, this is more than just a tax cut; it is a vote of confidence.