India woke up this morning to cheaper milk, ghee, soya chunks, medicines, and even cars. The country’s much-awaited GST 2.0 reform officially kicked in on September 22, collapsing multiple tax slabs into a simpler structure and handing what Finance Minister Nirmala Sitharaman has described as a Rs 2-lakh-crore boost to consumers’ pockets.
For households grappling with sticky inflation and high daily expenses, this is not just policy change, but it is money saved at the cash counter.
"Bringing more than 90 per cent of the items from 12 per cent slab to 5 per cent slab is a masterstroke and will result is substantial savings in household expenses. In turn this will spur consumption and provide impetus to the economy and soften the blow of USA tariffs," Dinesh Kanabar, CEO, Dhruva Advisors LLP, said.
Real relief on everyday bills
For millions of Indian households, the change is already visible in kitchens and grocery aisles. Amul cut prices across 700 product packs, with ghee cheaper by Rs 40 a litre, directly reducing a recurring monthly expense. Mother Dairy has reduced milk prices by Rs 2 a litre, a move that will save families Rs 60 a month if they buy a litre daily, not a small number in tight household budgets.
Patanjali Foods also slashed MRPs on its Nutrela range, including a Rs 20 per kilo reduction on soya chunks, while edible oils, paneer, frozen foods, and packaged goods across brands are being repriced.
The tax cuts extend beyond food staples. Medicines and life-saving drugs are cheaper today, while GST exemptions on health and life insurance premiums remove the 18% tax burden, which earlier added thousands of rupees to family policies. For instance, on a Rs 40,000 annual premium, nearly Rs 7,200 went purely as GST. That amount is now saved!
Footwear, garments under Rs 1,000, and a range of personal care items have shifted to lower slabs. Even home appliances such as refrigerators, washing machines, televisions and other similar products which are usually on festive shopping lists, are now 8-10% cheaper after moving from the 28% slab to 18%.
Automobiles, one of the highest-ticket purchases for households, have seen the most visible impact outside essentials. Maruti Suzuki, Tata Motors, and Hyundai have all rolled out price cu ..
Footwear, garments under Rs 1,000, and a range of personal care items have shifted to lower slabs. Even home appliances such as refrigerators, washing machines, televisions and other similar products which are usually on festive shopping lists, are now 8-10% cheaper after moving from the 28% slab to 18%.
Automobiles, one of the highest-ticket purchases for households, have seen the most visible impact outside essentials. Maruti Suzuki, Tata Motors, and Hyundai have all rolled out price cuts, making hatchbacks and SUVs cheaper by several thousand rupees. With festive bookings already in full swing, the industry is expecting a strong response from buyers who were on the fence.
A festive season tailwind
The government has timed GST 2.0 to coincide with the start of the festive season, a period that traditionally sees a surge in consumption across food, clothing, electronics, and automobiles. In states like West Bengal, Bihar, Rajasthan, Gujarat where festivals like Durga Puja, Chhath Puja, Diwali and Navratri drive an annual shopping frenzy, retailers are already positioning lower GST as a selling point. Electronics chains have put up revised price ..
This is nothing but a classic demand stimulus: by putting more disposable income in the hands of consumers right before the busiest shopping period, the government is banking on higher volumes across sectors.
An Economic Times report, citing Grant Thornton Bharat, stated that the GST rate cuts are expected to bring down prices of FMCG products by 8–10%, depending on brands and supply chain efficiencies. The consultancy added that such reductions could translate into an additional 2–3 percentage points of growth for the industry in the near term as lower MRPs spur buying. Auto makers, too, expect higher bookings during Navratri and Diwali, particularly in the SUV segment where demand is already strong ..
The reform has also been structured to benefit semi-urban and rural markets, where lower incomes mean higher sensitivity to price changes. Products such as jute bags, handicrafts, tea, and agro-goods which are the staples of rural and small-town economies now attract lower GST. That not only helps consumers but also artisans, farmers, and small producers, giving them access to a larger market during the festive period.
Retailers and small traders, who sell a majority of the items that have moved to the 5% slab, are also expected to see higher footfall. For kirana shops, this is both a revenue boost and a way to clear stock faster, while simplified GST compliance promises smoother operations.
Why it matters for growth & the Indian economy
The Rs 2 lakh crore figure is not just an accounting exercise. Consumption makes up nearly 60% of India’s GDP, and slowing household demand had been a concern in the past. By reducing the tax burden on goods and services most frequently consumed by the middle class and the poor, GST 2.0 is designed as a direct injection of liquidity into the economy.
The move comes with fiscal costs, too. The Centre has acknowledged potential revenue losses of Rs 48,000 crore from rate cuts. But the government argues that stronger consumer demand, coupled with better compliance under a simplified tax regime, will offset those losses. Businesses, too, see a long-term benefit: fewer slabs and clearer classifications mean reduced litigation and compliance headaches, freeing up resources for growth.
Analysts back this optimism. According to CRISIL, the GST cuts will directly benefit 11 of the top 30 consumption items, covering nearly a third of an average household’s monthly expenditure. Essentials like milk products and medicines, along with discretionary purchases such as two-wheelers, televisions, and processed foods, now carry lower taxes. CRISIL estimates that the simple average GST rate on these top consumption items has fallen from around 11% to 9%, which is a reduction that should g ..
CRISIL also expects price cuts in entry-level cars of 8–9%, around 7–8% in standard two-wheelers, and up to 6–7% in premium SUVs as compensation cesses are removed. “If producers pass on the benefits swiftly, it will ease inflationary pressures and provide a durable push to consumption,” the agency noted.
Global rating agency Moody’s echoed similar sentiments, calling the reform a “credit positive” for non-financial companies. It highlighted that lower GST will aid affordability in FMCG, durables, and cement, while exemptions on health and life insurance premiums would improve access for households and support long-term growth in India’s insurance industry.
Moody’s also said that reduced effective GST rates would strengthen consumption at a time when higher US tariffs and global headwinds are weighing on exports.
“The reduction of taxes on essential and daily-use products will enhance disposable incomes for households and stimulate domestic demand. These reforms will significantly boost domestic manufacturing and demand for Indian-made products, giving fresh momentum to the Swadeshi movement. By focusing on manufacturing and supporting Swadeshi, Indian industry is poised to become more self-reliant and globally competitive, accelerating India’s journey towards Aatmanirbhar and Viksit Bharat,” said Rajiv Memani, President of CII...
So it is clear that every rupee saved on milk or ghee can be spent elsewhere- maybe on a bus ride, a restaurant meal, a new kurta, or even a movie ticket! Each of those, in turn, sustains jobs, generates GST revenue, and fuels further economic activity.
In an uncertain global environment, this domestic demand push is critical to sustaining India’s growth momentum.
The test, of course, lies in execution. Consumers will watch carefully to ensure that price cuts are not diluted along the supply chain. Inflationary pressures, especially on fuel and raw materials, could eat into the benefits if not monitored. And states, which depend on GST revenues, will need to manage fiscal pressures in the short term.
Yet, on balance, the launch of GST 2.0 has brought a sense of optimism to shop floors, kirana counters, and auto showrooms across the country. For consumers, it means immediate relief on essentials and a little more room to spend freely during festivals. For businesses, it promises higher volumes and renewed demand. And for the economy, it could well mark the start of a virtuous cycle just ahead of Diwali: more cash in hand, more consumption, and more growth.
Source Name : Economic Times