How Will GST Reforms Impact 11 Out of 30 Top Consumption Items?
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Synopsis
Discover how the new GST reforms will influence the prices of essential goods and services, benefiting consumers across the country. Learn about the implications for purchasing power and the anticipated changes in the automotive sector.
Key Takeaways
- GST rates reduced for 11 of the top 30 items
- Average GST rate expected to drop from 11% to 9%
- Purchasing power likely to improve for low-middle income groups
- Price reductions anticipated across various sectors
- Long-term impact expected over the fiscal year
New Delhi, Sep 18 (NationPress) A recent report indicates that the revised Goods and Services Tax (GST) rates will positively impact 11 of the top 30 consumption items, which account for roughly a third of an average consumer's monthly spending.
Among these items are essential milk products, discretionary items such as automobiles and beauty services, as well as goods that have seen increased demand in recent years, like processed food.
According to Crisil Ratings, the simple average GST rate for these top 30 consumption items is projected to decrease from 11 percent to 9 percent under the new structure.
This adjustment is expected to enhance purchasing power, particularly for the low-to-middle income demographics, as the consumption-weighted average GST rate is lower for most food and household products, with tax rates potentially dropping to either 0 percent or 5 percent.
For certain categories, GST rates have been reduced exclusively for lower-value items, including clothing, footwear, and two-wheelers. This aligns with the Income-Tax relief announced in the budget, which aims to bolster demand.
The shift in consumption patterns will largely rely on how effectively producers transfer these rate reductions to consumers.
Global evidence suggests that the impact of tax changes varies widely from country to country.
Furthermore, adjustments may take time. For India, we anticipate the effects of GST reductions on consumption will unfold over this fiscal year and the next, as stated in the report.
The recent GST rationalization is expected to yield two significant benefits: a more streamlined rate structure that simplifies compliance and promotes formalization, and a boost to consumption as prices of mass-market goods decline.
Notably, the GST has been lowered across all car categories. The tax rate for entry-level small cars has decreased from 29 percent to 18 percent, while premium cars have also seen effective reductions (from 50 percent to 40 percent), along with the removal of the compensation cess.
The report estimates an 8-9 percent drop in average prices for entry-level car segments, a 3.5 percent decrease for mid-sized Sports Utility Vehicles (SUVs), and a 6.7 percent decline for premium SUVs.
Point of View
It's essential to recognize the implications of these GST reforms not only for the economy but also for consumers. With an expected reduction in tax rates for crucial goods, we anticipate a positive shift in purchasing power, particularly for the middle and lower income groups. It’s a step forward in making essential goods more affordable, while also supporting demand across various sectors.
NationPress
20/09/2025
Frequently Asked Questions
What are the key benefits of the new GST rates?
The new GST rates are expected to lower tax burdens on essential consumption items, enhance purchasing power, and stimulate demand in various sectors.
How will the GST reforms affect car prices?
The GST reduction will lead to a decrease in car prices, with entry-level small cars experiencing a drop from 29% to 18%, benefiting consumers.
When will the impact of GST cuts be felt?
The effects of GST cuts on consumption are expected to unfold over the current fiscal year and the next, as producers adjust prices.
