Prime Minister Narendra Modi announced that the revised GST rates, implemented from September 22nd, along with earlier income tax reforms, are expected to save Indians approximately ₹2.5 lakh crore. Dubbed a “savings festival,” these changes aim to provide financial relief, particularly benefiting the middle class and lower-income groups.
Effective from the start of Navaratri, approximately 375 items will see reduced GST rates, making a wide array of products and services more accessible. This includes essential household goods, medicines, electronics, appliances, and even vehicles.
Key GST 2.0 Changes:
- A simplified two-tier tax structure: Most goods and services will be taxed at either 5% or 18%.
- Ultra-luxury items will face a higher levy of 40%.
- Tobacco products will remain in the 28% tax bracket, with an additional cess.
- This reform marks the most significant overhaul of India’s consumption tax system since GST’s introduction in 2017, moving away from the previous four slabs (5%, 12%, 18%, and 28%) and compensating cess.
Everyday essentials like ghee, paneer, butter, snacks, and ice cream, along with aspirational products such as TVs, air conditioners, and washing machines, are expected to become more affordable. PM Modi encouraged the purchase of domestic products, emphasizing that these GST reforms will stimulate economic growth, streamline business operations, and attract investment.
While policymakers anticipate a boost in domestic consumption to offset potential impacts from global trade dynamics, the opposition has voiced criticism, calling the changes a “band-aid on deep wounds.” They have also called for accountability regarding the initial taxation of essential goods.
The government’s objective is to foster stronger domestic demand, which is seen as crucial for economic resilience. The Prime Minister highlighted the positive impact on small and medium enterprises (SMEs), noting that reduced taxes will enhance their competitiveness and support their significant contribution to the economy.
The anticipated reduction in prices for automobiles is expected to benefit first-time buyers and encourage upgrades, stimulating demand across manufacturing, component suppliers, and financing sectors. Similarly, the decreased prices for household goods and appliances, strategically timed with the festive season, are predicted to drive sales across FMCG networks, retail chains, and e-commerce platforms.