How Lower GST Rates are Powering India’s Business and Consumer Boom: A Complete Overview - Trade Brains

Introduced on 1st July 2017, the Goods and Services Tax (GST) is the country’s most important indirect tax system since Independence. GST has created a common national market by combining various central and state taxes into one unified system, which not only reduced the cascading effects of taxes but also simplified compliance and improved transparency. 

By combining the GST rates into two main slabs, such as 5% and 18%, instead of the previous rates of 12% and 28%, the recent GST reforms significantly simplified the GST structure and made taxation more transparent and understandable. To ensure fairness and revenue balance, a higher rate of 40% is applied to luxury and sinful goods like tobacco, pan masala, aerated beverages, expensive cars, yachts, and private planes.

This editorial discusses the impact of the recent GST reforms on various industries, including Automobiles, consumer durables, FMCG, retail, healthcare and pharmaceuticals, and Insurance, to understand how businesses across various sectors are impacted and how consumers are benefited. 

Impact on Automobiles 

The automobile sector, being a cornerstone of India’s manufacturing landscape, has been prioritised in the recent reforms, with significant rate cuts benefiting businesses with increased demand as well as consumers with greater affordability. GST rate cuts cover motorcycles (up to 350cc), buses, small and luxury cars, tractors under 1800cc, commercial goods vehicles, and their components. The reduction in GST also lowers costs across the supply chain, including tyres and batteries to steel, glass, plastics, electronics, and other ancillary products. 

These rate cuts increase demand and stimulate the whole ecosystem, as the automobile industry supports over 3.5 crore direct and indirect jobs, which cover manufacturing, sales, finance, transport, and service roles. Moreover, informal sector workers, including drivers and mechanics, would also benefit from the rate cuts. 

Major players, including Mahindra, Tata, Hyundai, Toyota, and more, have passed on the tax benefits to the consumers by providing price cuts from thousands to lakhs of rupees, which also coincided with the festive season, which further boosted demand and increased consumer buying. Furthermore, passenger vehicle retail sales in India hit a record 557,373 units in October 2025, supported by the rate cuts and festive demand, while in H1FY26, domestic production increased by 3.8%, and exports surged 18%, signalling strong competitive momentum internationally.

Major manufacturers, including Maruti Suzuki, Tata Motors, and Hyundai, are responding with expansion plans in the coming months. Maruti Suzuki aims to produce over 200,000 vehicles in November, representing an increase from its average monthly production of 172,000 units. Tata Motors plans to increase its monthly output to 65,000-70,000 units, up from 47,000 units, whereas Hyundai has started its second shift at its Talegaon plant to expand capacity by up to 20%.

Major Price Reductions by Industry Leaders Following GST Benefits

Maruti Suzuki: The automaker has passed on the benefits of GST revisions to customers by cutting prices by up to Rs 1,29,600. The steepest reduction applies to its entry-level S-Presso model, now priced at Rs 3,49,900. The popular Swift model also received a price cut of Rs 84,600, bringing its new price to Rs 5,78,900.

Tata Motors: The Nexon model registered one of the biggest price drops, with a reduction of Rs 1.55 lakh and an additional benefit of Rs 45,000. After GST, the Nexon’s new ex-showroom price stands around Rs 7.31 lakh.

Hyundai Motor India: Hyundai implemented price cuts of up to Rs 2,40,303, with the Tucson seeing the largest reduction. Other models, including the Grand i10 Nios, Aura, Exter, i20, Venue, Verna, Creta, and Alcazar, also witnessed substantial reductions ranging from Rs 60,000 to over Rs 1.2 lakh.

Impact on Consumer Durables

The country’s consumer durables industry is witnessing a boost in demand after GST rate cuts, coupled with festive season demand. The recent reforms have significantly reduced the taxes on consumer durable goods from 28% to 18%, thus increasing affordability among consumers. This would mean prices of big-ticket appliances like Air conditioners, Refrigerators, large-screen TVs, Dishwashers, Washing Machines, and more would become more accessible for consumers, especially in Tier 2 and Tier 3 cities. Businesses have been passing on the GST benefits to the consumers, which is enhancing their volume growth; however, the businesses would also face immediate challenges with regard to clearing older inventory and revising pricing strategies, as well as updating the billing system. 

Major AC manufacturers, including Voltas, Bluestar, and Amber Enterprises, saw muted Q2 FY26 results due to slower demand in the AC segment, impacted by unseasonal weather as well as the GST rate cuts introduced in September, which led many consumers and businesses to postpone room and commercial AC purchases. However, industry sentiment remains positive for Q3 FY26, as companies anticipate demand to rebound once customers fully factor in the benefits of the GST reductions. 

Leading Consumer Durables Firms Slash Prices After GST Benefits

Voltas Ltd: The company has reduced product prices by around 10%. The Inverter Window AC (WAC 183V Vertis Elite) now costs Rs 43,290, down from Rs 46,990, while the Voltas Beko 8 Place Settings Dishwasher is priced at Rs 23,390, reduced from Rs 25,990.

Whirlpool of India Ltd: Price reductions have been implemented across air conditioners and dishwashers. The 1-ton AC range saw cuts between Rs 4,509 and Rs 5,259, the 1.5-ton range between Rs 3,907 and Rs 5,836, and the 2-ton range at Rs 6,111. Dishwasher prices dropped by Rs 3,282-Rs 4,336.

LG Electronics India Ltd: LG has announced substantial price cuts on its television portfolio, ranging from Rs 2,500 to Rs 85,800. The 43-inch model now costs Rs 28,490 (earlier Rs 30,990), while prices for the 55-inch and 65-inch models have been lowered by Rs 3,400 each to Rs 42,990 and Rs 68,490, respectively. The 100-inch TV now retails at Rs 4,99,790 after a reduction of Rs 85,800.

Impact on FMCG & Retail

GST rates have been cut down to 5% from an earlier 12% or 18% for various food products, footwear, and apparel (up to Rs 2,500), as well as other FMCG products. The benefits of the GST cuts will be passed down to consumers in the form of price cuts, making everyday essentials more affordable. 

India’s FMCG sector saw volume growth of 5.4% in the September quarter, slower than the previous quarter due to GST rate transition effects, according to NielsenIQ. Sales value rose 12.9%, driven by a 7.1% increase in prices and steady demand for smaller product packs. Rural markets, contributing 38% of overall sales, expanded 7.7% year-on-year, outpacing urban growth of 3.7% for the seventh straight quarter. While rural growth eased slightly from the previous quarter, analysts expect continued momentum as GST benefits stabilize trade and consumer demand.

Though the GST transition led to a pause in purchases by retailers and destocking, which impacted the immediate FMCG sales and demand, once the supply chain normalizes, the majority of the companies, including Hindustan Unilever, Godrej Consumer Products, ITC, Dabur India, Nestle India, and more, anticipate volume-driven growth in the coming quarters. 

Insurance Industry Developments

The insurance industry has witnessed major changes in the GST rate, as the rate on individual health and life insurance premiums has been reduced to 0%, down from the previous rate of 18%, aiming to make insurance more affordable for policyholders.

Major life insurance companies, including HDFC Life, Axis Max Life, and SBI Life, are witnessing a surge in demand for pure protection products, supported by the GST exemption on individual term insurance. This exemption has increased the affordability of term insurance, which encourages first-time buyers to choose pure protection covers, and this growth trend is anticipated to be sustained in the upcoming quarters as awareness and affordability increase. Moreover, the life insurance sector sustained its double-digit growth in October, with new business premiums at Rs 34,007 crore, up 12.1% YoY. 

HDFC Life’s retail protection growth jumped over 50% YoY in September. In Q2 FY26, its protection business increased 27%, nearly three times the company’s overall growth. Whereas, Axis Max Life Insurance recorded a 34% YoY growth in its protection business, and SBI Life’s protection segment expanded 33% YoY on an annualized premium equivalent basis. 

India’s insurance segment remains highly underpenetrated, with the protection gap estimated at over 80% in 2019, among the widest in the Asia-Pacific region. Recent GST relief on select insurance products is expected to improve affordability and support broader coverage, gradually helping to narrow this protection gap. 

Healthcare and Pharmaceutical Sector Effects

India’s latest GST reforms in the pharmaceutical sector aim to make healthcare more affordable and accessible. GST on all medicines has been cut from 12% to 5%, while 36 key life-saving drugs for cancer and rare diseases are now fully exempted, thus helping reduce patient costs and improve access to vital treatments. Medical devices now incur a lower 5% GST (down from 12% or 18%), and pharma job-work services are also taxed at 5% instead of 12%, easing costs across the industry.

These changes promote broader, equitable healthcare access and support public health, reinforcing India’s role as a global pharma leader. In the short term, major firms like Sun Pharma, GlaxoSmithKline India, and Cipla faced brief disruption due to destocking and repricing older inventories, which can temporarily affect margins.

Business Benefits: Cash Flow, Margins, and Compliance

The GST reforms of 2025 have significantly improved business liquidity and operational efficiency. By consolidating tax slabs and reducing rates on inputs, such as components for automobiles, consumer durables, FMCG goods, insurance products, and pharma intermediates, companies are benefiting from lower working capital requirements and immediate cash flow relief. 

Though transitional challenges like destocking and repricing impacted margins for sectors such as consumer durables and pharmaceuticals in the short term, the clearer and simpler tax framework and lower rates are ultimately expected to support long-term margin expansion and stronger financial health for businesses.

Consumer Experience: Affordability and Demand

Consumers across the country are witnessing significant advantages from the revamped GST system. Reduced tax rates on everyday essentials, medicines, consumer durables, and insurance products have made these items more affordable, leading to increased demand even in rural areas. The price cuts have also boosted sales of automobiles and durable goods.

This improved affordability is driving first-time purchases and expanding retail reach into Tier II and Tier III cities, while facilitating greater access to health, financial, and protection products. As GST-related savings fully penetrate supply chains and industries respond with new product launches, this surge in consumer activity is expected to continue growing.

Conclusion

GST 2.0 has brought in a simplified, future-ready tax regime that fuels growth for Indian businesses and empowers consumers. By lowering rates, streamlining compliance, and enhancing affordability, the reforms have increased demand across key sectors, including automobiles, durables, FMCG, insurance, and healthcare, while strengthening business margins and operational efficiency. As the supply chain normalizes and the benefits of these reforms spread, both businesses and households stand to gain, supporting India’s economic momentum and furthering the vision of a more equitable, high-growth consumer economy. 

Written By Adhvaitha Nayani BA

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