Big GST Overhaul: Lower Taxes, More Savings for India

Sector-Wise Benefits

1. Daily Essentials & FMCG

The biggest relief comes for households. Products that were earlier taxed between 12–18% have now been brought under the 5% GST slab. This includes:

1. Toothpaste, soap, and hair oil
2. Dairy items such as butter and ghee
3. Packaged foods like instant noodles, chocolates, and spreads

This move directly reduces the cost of daily essentials, providing immediate relief to consumers and stimulating higher consumption for FMCG companies.

2. Healthcare & Insurance

In a major step towards affordability, personal health and life insurance policies are now GST exempt. Additionally, several healthcare products have been brought under the 5% slab, including:

1. Thermometers and diagnostic kits
2. Glucometers
3. Contact lenses and spectacles

By reducing healthcare costs, this reform makes critical services and medical products more accessible to the masses while supporting India’s broader healthcare ecosystem.

3. Automobiles & Auto Components

The automobile sector, one of the largest contributors to GDP and employment, has received a significant boost:

1. Two-wheelers (≤350 cc) and small cars: Now taxed at 18% (earlier 28–31%)
2. SUVs: Reduced to 40% from nearly 50%
3. Tractors and parts: Tax cut to 5%, supporting farmers and the rural economy

Lower costs are expected to increase vehicle sales, support ancillary industries, and give a strong push to rural transportation and mechanization.

4. Consumer Durables & Electronics

High-ticket consumer goods such as air conditioners, large-screen TVs, dishwashers, and three-wheelers will now fall under the 18% slab instead of 28%.

1. Expected price drop: 8–9%

This will make durable goods more affordable for middle-class households while boosting demand for the consumer electronics industry.

5. Fertilizers, Agriculture & Renewable Energy

The government has prioritized agriculture and sustainability by cutting GST rates on:

1. Fertilizer acids, drip irrigation systems, and tractors & parts
2. Solar cookers and renewable energy equipment

The move to a 5% slab reduces input costs for farmers and accelerates the adoption of clean energy solutions—supporting both rural growth and India’s renewable energy ambitions.

Economic Impact

The GST overhaul is more than just a tax reduction; it’s an economic stimulus package:

1. Stock Market Rally: Shares of automobile and consumer goods companies like Mahindra & Mahindra, Britannia, and Nestle surged as investors priced in stronger demand.
2. GDP Boost: Economists estimate the reforms could add 100–120 basis points (1–1.2%) to GDP growth in the coming quarters.
3. Inflation Control: Price cuts are expected to soften inflation, creating room for the Reserve Bank of India to consider interest rate easing.

Conclusion

The GST 2.0 reform marks a turning point for India’s taxation and consumption landscape. By simplifying tax slabs and reducing rates across critical sectors, the government has not only made everyday essentials more affordable but also laid the foundation for long-term growth in industries ranging from FMCG to automobiles and renewable energy.

This is more than a tax reform—it’s a growth reform aimed at creating a more consumer-friendly, investment-ready, and globally competitive India.