The latest round of GST revisions, which has reduced multiple tax slabs into two major categories of 5 per cent and 18 per cent, is one of the most significant reforms in indirect taxation since the introduction of GST in 2017. This GST relief will save nearly Rs 2.5 lakh crore annually. From groceries and medicines to vehicles and electronics, the reform touches almost every Indian family. The reform comes at a crucial moment. Indian markets, particularly the manufacturing sector, have been under strain from global tariff wars and sluggish consumer demand. A reduction in GST rates, especially on daily essentials and durable goods, is expected to release pent-up demand, acting as a much-needed stimulus. The timing-aligned with the start of Navratras and the festive season-could not have been better. Already, reports of record sales from car manufacturers like Maruti Suzuki and Hyundai on the first day of Navratras indicate that the Government’s strategy is paying off.
Households, too, stand to gain in very tangible ways. According to Government estimates, groceries and daily essentials will see savings of about 13 per cent on household bills. For big-ticket items, such as vehicles, TVs, and air conditioners, the cuts translate into meaningful relief. In addition, the exemption of GST on life and health insurance policies addresses a long-standing demand of the middle class. This will provide a double benefit: immediate savings for families and a likely increase in insurance penetration in the country, something India has lagged behind in compared to global averages. Students and parents also stand to benefit. The lowering of GST on books, stationery, and related items directly addresses concerns raised by education stakeholders. For a country where a young population forms the backbone of future growth, making education-related expenses lighter is a socially meaningful intervention.
However, the reform is not without its complications. The opposition-ruled states have voiced their strong objections, arguing that the Centre is taking “undue credit” while they will be left to bear the revenue losses. Their concerns are not unfounded. Taxes are the lifeblood of welfare schemes, infrastructure building, and state-level development projects. While GST collections at the national level are currently robust-consistently above Rs 2 lakh crore per month-the redistribution of this revenue and the potential medium-term impact on state coffers remain open questions.
While consumers are promised relief, the real challenge lies in ensuring that businesses pass on the benefits instead of quietly increasing base prices. In sectors like edible oil and cement, prices had already seen a spike just before the reform, meaning that the GST reduction will only neutralise the earlier increase rather than deliver true savings. Similarly, for certain items where raw material GST has been increased but finished goods enjoy reduced GST, the net effect may be marginal. A vigilant market feedback mechanism will therefore be necessary to ensure that the intended benefits reach ordinary citizens.
From a broader perspective, this reform reflects a deeper political economy. For years, the public has complained about GST being too high on essentials such as insurance, stationery and vehicles. By addressing these issues, the Government not only relieves economic stress but also connects with the aspirations of the working and middle classes. The move to combine GST cuts with an income tax exemption up to Rs 12 lakh further increases disposable income, creating a multiplier effect for consumer demand.
Ultimately, the reform is a strategic gamble. If consumer spending surges and industries recover from sluggishness, the Government could achieve a dual objective: reviving growth while strengthening political goodwill ahead of elections. If, however, states’ revenues shrink and the benefits fail to percolate fully to consumers, criticism will intensify. For now, it appears to be a win-win situation for the average consumer. The relief in insurance, education, daily essentials, and durable goods creates a positive atmosphere of trust and optimism. Walking the thin line between fiscal responsibility and public aspirations is no easy task. With this GST revision, the Government has signalled its intent to walk that path boldly.
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