GST Complexity: Is India’s Tax System Wearing Businesses Down?

GST Rates Shifts Means Businesses Have to Relabel Stock, Manage Paperwork, and Adapt to New Slabs; but is India’s Tax Reform Easing Growth or Adding Fresh Pressure?

For years, India’s Goods and Services Tax (GST) has been sold as a ‘one nation, one tax’ dream. But as the country enters the busy 2025 festive season, many business owners are finding that the reality is more like a complicated puzzle. While recent tax cuts by Prime Minister Narendra Modi’s government are meant to help shoppers spend more, they have also highlighted a growing problem: the sheer effort it takes for businesses to keep up with a system that never stops changing.

Big Relief for Consumers, Big Task for Businesses

Many items like milk, bread, life, medical insurance, and life-saving drugs are tax-free. GST on small cars, televisions, and air conditioners was cut from 28% to 18%. Everyday products like hair oil, soap, and shampoo now attract a lower 5% rate instead of 12% or 18%, as reported by The Times of India.

Household consumption makes up more than half of the country’s GDP. So, any rise in spending can lift the wider economy. The cuts also follow a $12 billion income tax relief package and lower interest rates, which may support demand.

Large companies like Reliance Industries, Hindustan Unilever, and Mahindra & Mahindra said they would pass on the benefits to customers. Auto stocks have already risen between 6% and 17% since the announcement, as investors expect higher sales.

Dealers are hopeful. According to a BBC report, at a Hero MotoCorp showroom in Mumbai, staff report 30-40% higher footfall in just two months. This is especially true for entry-level models where buyers are more sensitive to price changes. Many customers are planning to buy around major festivals to make the most of discounts and lower taxes.

Rush to Re-Label and Re-Price

The newest tax changes, which started in late September 2025, have turned daily life upside down for retailers. For many, the timing is a mix of good and bad news. On one hand, seeing taxes drop is a great way to get customers into stores. On the other hand, the suddenness of the move has left shopkeepers in a mad dash.

In markets like Mumbai’s Crawford Market, the mood is one of confusion. When a tax rate changes overnight, a store owner cannot simply sell their old stock at the new price without a lot of paperwork. They have to stick new price labels over old ones, ensuring the original price is still visible to stay legal. For a small shop with thousands of items, from hair oil to biscuits, this is a massive job. Many small traders feel they are spending more time acting as tax clerks than actually running their businesses.

Human Cost of Constant Changes

While big companies have giant accounting teams and smart software to handle tax shifts, small and medium businesses (SMEs) are struggling. For a neighborhood grocer or a local clothing brand, every new rule means a new learning curve. In the recent shake-up, the government moved to a simpler two-rate system for many goods, focusing on 5% and 18% slabs. While this aims to make things easier in the long run, the immediate shift has caused a errors.

One major hurdle is the lack of clear information. In wholesale hubs, many sellers are still arguing with suppliers over who should pay the difference for stock bought at old, higher rates. This behavioral gap, where people are simply too tired or confused to adapt quickly, is slowing down the very economic boost the government wants to see. When a shopkeeper is unsure about the law, they might hesitate to stock new items, leading to empty shelves during the year’s biggest shopping window.

Winning and Losing in the New Slabs

The tax overhaul has created clear winners and losers. Buyers of budget bikes and home appliances are cheering as prices drop. Manufacturers are also happy to see more people asking about cheaper variants that now carry a lower tax burden. 

However, some sectors feel left out in the cold. For example, the wedding industry is facing a tough time. While cheap clothes now have a lower tax, anything priced over $29 (about ₹2,500) faces a much higher 18% levy. Since almost all wedding outfits cost more than that, bridal shops are worried that families will cut back on their big day spending.

This shows the main flaw in a ‘one-size-fits-all’ tax; what helps a car buyer might hurt a craftsman making traditional sarees. These anomalies mean that businesses have to constantly change their pricing models to stay afloat. Instead of focusing on making better products, they are forced to spend their energy navigating the narrow gaps between different tax brackets.

Also Read: Cigarette Prices Rise by Rs. 25: New Tax Impact and Risks 

Balancing the Books for the Future

The government knows that these tax cuts come with a price tag, nearly $5.4 billion in lost revenue this year alone. To make up for this, there is more pressure than ever on businesses to be perfect in their filing. New rules like mandatory e-invoicing for smaller firms and tighter checks on tax credits are being rolled out. While these steps help stop fraud, they add yet another layer of stress for the honest business owner who just wants to sell their goods.

Ultimately, the 2025 GST reforms are a bold attempt to spark a spending fire in the Indian economy. If the plan works, the middle class will have more money to spend, and factories will hum with new orders. Although for this to happen, the paperwork maze needs to become a highway. Until the system stays stable for more than a few months at a time, India’s businesses may continue to feel that they are running a race where the finish line keeps moving.

Also Read: Union Budget 2026–27: Seniors May Get Higher Interest Tax Relief and Healthcare Deductions, Says Deloitte