Feel good factor from GST rate cut, housing demand to rise during festivals: CREDAI - The Economic Times

  • After the 56th GST Council Meeting (3rd September 2025), the government announced GST 2.0 rollout from 22nd September.
  • Over 375 common-use goods saw GST rate reductions.
  • PM Modi called this the beginning of a “GST Savings Festival” aimed at reducing household expenditure and boosting consumption.

Impact on Consumers

  • Household budgets to benefit significantly due to reduced prices of FMCG goods, durables, automobiles, and services.
  • Finance Ministry to monitor monthly prices to ensure companies pass on benefits.

Sector-Wise Benefits

  1. FMCG & Food Items
  • Amul & Mother Dairy: Paneer exempted (earlier 5%), milk cartons, butter, cheese, khakra, parathas—all cheaper (3–12%).
  • Kellogg’s & Sunfeast: Cornflakes and biscuits ~11–12% cheaper.
  • Pringles chips: 12% price cut.
  • Ice creams: GST cut from 18% to 5%, making them significantly cheaper.
  1. Personal Care Products
  • Shampoo, soap, toothpaste, hair oil etc. moved from 18% to 5% GST → 11–13% cheaper.
  • Brands: L’Oréal, Himalaya, Close-Up, Dove.
  1. Cement & Construction Materials
  • Cement GST cut from 28% to 18% (~10% cheaper).
  • Boost for construction sector, real estate, and MSMEs.
  1. Insurance
  • Health & life insurance premiums exempted (earlier 18%) → annual premiums down by ~15%.
  1. Consumer Durables
  • Whirlpool appliances (ACs, dishwashers) saw cuts of ₹3,000–₹5,000.
  1. Automobiles
  • Maruti Suzuki passed on full benefits: Cars cheaper by ₹46,400–₹1.29 lakh.
  • Small cars: GST cut to 18% (earlier 28% + cess).
  • Dealers faced losses (~₹2,500 crore) due to unsold stock taxed at old rates.

Economic Implications

  • Boost to consumption demand due to lower inflation and increased purchasing power.
  • Expected rise in savings and investments.
  • Positive spillover for multiple sectors: FMCG, automobile, construction, MSMEs, and services.
  • Transitional challenges for small enterprises and auto dealers (unused input tax credit, stock purchased at old rates).

UPSC Relevance

  • GS Paper III (Economy): Tax reforms, GST rationalization, inflation management.
  • Topics: Indirect taxation, impact on households, consumption-led growth, cooperative federalism (GST Council).
  • Keywords: GST 2.0, GST Council, Consumption boost, Household savings, Inflation control, MSME support.

In essence: The GST 2.0 rate cuts are a landmark tax reform aimed at easing household expenses, improving demand, and strengthening economic growth, though transitional challenges exist.