As the Centre prepares to implement a restructured Goods and Services Tax (GST) regime by this Diwali, businesses are bracing for sweeping adjustments across pricing, supply chains, and technology systems. The proposed rationalisation of tax slabs are expected to reshape operational strategies, particularly for small and medium enterprises.
Analysts said that moving products from the lower slabs will provide relief to consumer-facing industries but will also require businesses to reassess retail pricing and inventory positions.
“Companies will need to reassess pricing across product lines, review distributor arrangements, and communicate changes carefully to consumers. Stock already lying with taxpayers at the time of rate change often creates practical issues,” said Neha Shrivastava, associate partner, Indirect Tax, Forvis Mazars (India). Thus, companies will have to evaluate the financial impact on pricing as well as how rate cuts are passed on to consumers.
The transition may also create complexities around input tax credit (ITC). Tax rate reductions could lead to an accumulation of ITC balances, and industry remains uncertain whether refunds will be available under the inverted duty structure.
“Businesses must also factor in anti-profiteering rules, which were active until March 31, 2025, but could be extended. A detailed supply chain review will also be essential to evaluate any possible inverted duty structure and manage potential credit accumulation,” said Pratik Jain, partner, Price Waterhouse & Co LLP.
Companies with exposure to state-level incentive schemes may also need to reassess their positions. Rate rationalisation could affect net State GST reimbursements under industrial policies in states such as Maharashtra, prompting businesses to rework their cost and incentive models. Operational preparedness will be the key, particularly in managing inventory, passing on discounts, and handling distributor contracts.
Promotional strategies are likely to get a revamp. Manufacturers in the 5% slab often avoid promotional schemes fearing mixed supply attracting higher taxes.
With more goods moving to lower rates, companies can design more customer-focused promotions. Digital channels of the businesses will require adjustments too. Vivek Baj, partner, Economic Laws Practice, noted that companies must work with e-commerce platforms to update marketplace-seller settlement models and “re-evaluate HSN classification of goods to ensure the correct GST rate is applied from the date of change in rate of tax.”
Industry players have also flagged the need for clarity and sufficient time to implement the amendments. With amendments expected by Diwali, businesses are seeking a clear roadmap.
Shivam Mehta, Executive Partner, Lakshmikumaran & Sridharan Attorneys asserts that the government needs to provide prior notice, clear guidelines and a reasonable window for businesses to make the necessary changes which will help ensure that the intended benefit of price reduction actually reaches customers in a timely and seamless manner.