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Picture Courtesy: The Hindu

Context:

India’s tractor industry — the backbone of its agriculture — is entering a decisive phase. The government’s recent move to reduce the Goods and Services Tax (GST) on tractors to 5% aims to make farm mechanisation more affordable and strengthen the manufacturing base for exports.

Current status of GST rate cuts impacting exports:

India continues to treat exports as “zero-rated,” meaning exporters can claim full input tax credit (ITC) refunds on inputs and input services used in exported goods and services. (Source: global. ecovis)

In the 2025 reforms, GST on paper packaging, textiles, leather, wood was cut from 12–18% to 5%, lowering production costs for export-oriented manufacturers. (Source: PIB)

GST on trucks and delivery vans was reduced from 28% to 18%, and tariff cuts on toys and sports goods (12 → 5%) were also introduced to boost competitiveness in global markets. (Source: PIB)
The value-based threshold limit for claiming refunds has been removed — meaning even small export consignments can access refunds. (Source: PIB)

The GST rationalisation is expected to reduce IGST (import-linked GST) The Global Trade Research Initiative (GTRI) estimates a revenue loss of about ₹10,664 crore due to these reforms. (Source: TOI)

Structure of GST in India:

Type	Levied By	Applies To	Example
CGST (Central GST)	Central Government	Within a state	Sale of goods within Delhi
SGST (State GST)	State Government	Within a state	Sale of goods within Delhi
IGST (Integrated GST)	Central Government	Between states / exports / imports	Sale from Delhi to Maharashtra
UTGST (Union Territory GST)	Union Territories	Within UTs	Sale within Andaman & Nicobar Islands

Objectives of GST:

Eliminate tax-on-tax (cascading effect).
Simplify tax compliance through a unified system.
Improve revenue transparency and reduce evasion.
Boost exports by making them zero-rated.
Strengthen the ease of doing business in India.

Implications of GST Rate Cut on Exports:

Economic Impact

Boosts export competitiveness: Lower GST reduces production cost, making Indian goods cheaper abroad.
Increases foreign exchange earnings: Higher exports bring more dollars into the economy. In 2024–25, India’s exports touched $437 billion, partly supported by GST cuts in key sectors like tractors and machinery. (Source: The Hindu)

Industrial Impact

Encourages more manufacturing: Lower tax rates motivate companies to produce more for export.
Improves technology adoption: Firms invest in cleaner, advanced machines to match global standards. Logistics cost as a share of GDP dropped from 14% (2017) to about 10–11% (2025). (Source: The Hindu)

Social and Employment Impact

More job opportunities: Export growth creates employment in factories, logistics, and MSMEs.
Rural benefits: Lower GST on tractors and agri-equipment supports farmers and rural entrepreneurs. Around 6 lakh new jobs were created in export-linked MSMEs in 2024–25. (Source: The Hindu)

Environmental & Global Trade Impact

Encourages green exports: GST cuts on eco-friendly products like EVs and solar items promote sustainability.
Helps meet international standards: Cleaner and compliant products make India more acceptable in global markets. India’s green exports grew by 18% in 2024–25. (Source: The Hindu)

Government Measures to Increase Exports:

*Measure / Scheme*	Objective / Focus	Key Features / Actions	Data / Impact (2024–25)
*1. Production Linked Incentive (PLI) Scheme*	Promote domestic manufacturing and exports in key sectors	Financial incentives linked to production and exports; covers 14 sectors	Expected to add $500 billion in exports by 2030; mobile exports rose from $11B → $16B (Source: The Hindu)
*2. RoDTEP (Remission of Duties and Taxes on Exported Products)*	Refund hidden taxes not covered under GST	Refunds on fuel, power, transport, etc. for exporters	Covers 10,342 products, improving competitiveness (Source: The Hindu)
*3. EPCG (Export Promotion Capital Goods)*	Enable technology upgradation for export industries	Duty-free import of machinery for export production	Helped enhance quality and reduce production costs
*4. TIES (Trade Infrastructure for Export Scheme)*	Strengthen export-related infrastructure	Funds logistics parks, testing labs, cold storage	70+ projects approved since 2017. (Source: The Hindu)
*5. Free Trade Agreements (FTAs)*	Expand market access and reduce tariffs	CEPA with UAE, ECTA with Australia; talks with EU, UK, GCC	Exports to UAE rose 18% post-CEPA, (Source: The Hindu)
*6. Export Credit & Insurance (EXIM Bank & ECGC)*	Provide financial risk cover and credit to exporters	Cheaper export loans, risk insurance coverage	ECGC insured ₹8.5 lakh crore worth of exports. (Source: The Hindu)
*7. Digital Trade Facilitation*	Simplify export procedures	e-SANCHIT, ICEGATE, and paperless customs	Reduced documentation time by 25–30%
*8. Sectoral Promotion Policies*	Promote specific sectors (textiles, agri, gems, pharma)	MITRA Textile Parks, Agri Export Policy, support for lab-grown diamonds	Target: $100B agri exports by 2030. (Source: The Hindu)
*9. Logistics & Port Modernisation*	Reduce logistics costs and improve connectivity	Sagarmala, Bharatmala, PM Gati Shakti initiatives	Logistics cost reduced from 14% → 10–11% of GDP. (Source: The Hindu)
*10. GST & Tax Reforms*	Ease tax burden on export goods	Lower GST rates, faster refund system	Boosted liquidity and export competitiveness

Way Forward:

Focus on high-value goods like electronics, EVs, pharma, and green technology. Electronics exports grew 28% in 2024–25, reaching $29 billion. (Source: The Hindu)

Modernise ports, warehouses, and transport through Sagarmala and PM Gati Shakti. Logistics cost dropped from 14% to 10–11% of GDP, with a target of 8% by 2030. (Source: Indian Express)

Speed up Free Trade Agreements (FTAs) with the EU, UK, Canada, and GCC nations. India–UAE CEPA increased trade to $85 billion in FY 2024–25. (Source: Indian Express)

Provide easier loans, training, and digital platforms for MSMEs. MSMEs contribute 43% of India’s total exports (FY 2024–25). (Source: Indian Express)

Encourage eco-friendly products like solar panels, EVs, and organic goods. Green exports grew 18% in 2024–25. (Source: The Hindu)

Expand credit and insurance through EXIM Bank and ECGC. ECGC insured ₹8.5 lakh crore worth of exports in FY 2024–25.

Source: The Hindu

Practice Question

Discuss the major government measures to boost exports in India. How can India achieve the $2 trillion export target by 2030? (250 words)

Frequently Asked Questions (FAQs)

Exports are goods and services produced in India and sold to other countries. They help earn foreign exchange and strengthen the economy.

Exports boost economic growth, create jobs, improve foreign exchange reserves, and reduce the trade deficit. They also increase India’s global competitiveness.

In FY 2024–25, India’s total exports (goods + services) touched $829 billion, with $437 billion from merchandise and $392 billion from services.