Will GST Rate Cuts Provide Significant Relief for FMCG, Apparel, Footwear, and Restaurants?
Click to start listening
Synopsis
The recent GST rate cuts are a game-changer for India's consumption landscape. With reductions affecting FMCG, apparel, footwear, and quick-service restaurants, consumers can anticipate greater savings. This report delves into the potential benefits for various sectors and highlights the positive outlook for retailers and brands alike.
Key Takeaways
- GST on personal care items reduced to 5%
- FMCG companies to benefit from increased consumer spending
- Apparel and footwear priced between Rs 1,000 and Rs 2,500 taxed at 5%
- Quick-service restaurants to gain from reduced input costs
- Retailers expected to experience significant growth
New Delhi, Sep 7 (NationPress) The extensive GST rate reductions introduced by the government are set to significantly boost consumption in India, as highlighted in a recent report.
In their latest analysis, the international financial services firm Bernstein has presented an encouraging outlook for various sectors including footwear, quick-service restaurants (QSRs), FMCG, and grocery retail.
Bernstein noted that the most unexpected change was the substantial reduction in GST for personal and home care products such as soaps, shampoos, hair oil, powders, and toothpaste.
The tax on these items has been slashed from 12–18 percent to just 5 percent. The report states that this adjustment will provide immediate relief to FMCG companies, allowing them to retain a larger portion of consumers' spending.
In the medium term, this could stimulate increased demand, either through larger product sizes or because consumers will have additional funds for other purchases.
Grocery retailers such as DMart, Vishal Mega Mart, and Star (part of Trent), along with quick-commerce companies, are predicted to benefit greatly from these adjustments.
Changes have also been made in the apparel and footwear sectors. Previously, apparel priced below Rs 1,000 was taxed at 5 percent while those above Rs 1,000 faced a 12 percent tax.
Footwear below Rs 1,000 was charged 12 percent GST, while those priced above Rs 1,000 had an 18 percent tax.
Now, apparel and footwear priced between Rs 1,000 and Rs 2,500 will incur only a 5 percent tax.
For apparel over Rs 2,500, the GST has risen to 18 percent from 12 percent, and footwear above Rs 2,500 remains at 18 percent.
Bernstein indicated that this is a favorable shift for companies like Trent, which generates approximately 30 percent of its revenue from products exceeding Rs 1,000.
Aditya Birla Lifestyle Brands Limited and ABFRL will also see advantages as many of their items fall within this pricing bracket.
Footwear retailers such as Liberty, Campus, and Metro will also experience effects due to the new GST framework.
Quick-service restaurants are poised to be significant beneficiaries from these tax cuts. The GST on essential inputs like cheese, butter, ghee, margarine, sauces, and packaging materials has been reduced.
Given that QSRs do not receive input tax credits, all GST on their inputs directly influences their costs. Consequently, any decrease enhances their profit margins immediately.
Point of View
It's crucial to recognize how these GST adjustments will reshape economic dynamics. With a national approach, we can see that these changes not only benefit consumers but also empower businesses to thrive in a competitive market. It’s a win-win for India's economy.
NationPress
07/09/2025
Frequently Asked Questions
What is the new GST rate for personal care products?
The GST on personal care and home care items has been reduced from 12–18 percent to 5 percent.
How will this impact FMCG companies?
FMCG companies will retain a larger share of consumer spending, potentially leading to increased demand.
What changes were made to the GST for apparel and footwear?
Apparel and footwear priced between Rs 1,000 and Rs 2,500 will be taxed at 5 percent, while those above Rs 2,500 will face an 18 percent tax.
Which sectors are expected to benefit the most?
Sectors like FMCG, apparel, footwear, and quick-service restaurants are expected to see significant benefits.
What does this mean for consumers?
Consumers can expect lower prices on a variety of products, leading to more savings in their spending.
