Lower GST on Essentials and Electronics to Boost Consumer Demand and Market Growth

India’s Goods and Services Tax (GST) is set for a major rationalisation, with expectations of rate cuts on key consumer and industrial goods. The proposed changes are likely to bring relief to households, boost demand for essential products, and provide significant benefits to industries ranging from packaged foods to electronics.

Packaged Foods and Daily Essentials: Strong Demand Outlook

Lower GST rates on packaged food and daily essentials are expected to revive consumer sentiment after five quarters of sluggish sales. Urban consumers, who had cut back spending due to food and fuel inflation, are likely to benefit the most.

Executives suggest that if GST slabs of 5% or even 0% are applied to essentials, demand will rise sharply, particularly for entry-level packs. With the festive season approaching and a good monsoon boosting rural demand, the sector could see a much-needed consumption recovery.

According to NielsenIQ, value sales in the June quarter grew 13.9% year-on-year, supported by rural demand and urban recovery. Volumes rose 6% YoY, as consumers opted for smaller packs. These trends suggest that GST cuts would further accelerate growth in the FMCG sector.

Electronics and Appliances: Lower Prices to Drive Sales

Electronics, especially air conditioners and large-screen televisions, are also expected to benefit from GST rationalisation. Currently, these products attract 28% GST, but proposals suggest a cut to 18%, which could reduce prices by 8–10%.

ACs and large-screen TVs are expected to see a demand surge as price cuts offset upcoming energy efficiency-related cost hikes.

Large-screen TVs remain the only growing segment in televisions, and a tax reduction will further strengthen demand.

AC manufacturers like Blue Star have welcomed the move, noting that it would amplify sales and spur local manufacturing under the government’s Atmanirbhar Bharat initiative.

Discretionary Spending and Luxury Goods: Mixed Impact

While essentials and electronics may see lower GST, luxury handbags and cosmetics could face higher taxes, possibly attracting 40% GST, pushing prices up by around 10%. This move may dampen demand in the premium category but aligns with the government’s strategy to balance affordability for essentials with higher levies on luxury consumption.

Cigarettes: No Relief in Sight

Cigarettes continue to remain in the highest tax bracket. With 28% GST plus a 5% cess, along with duties like NCCD and excise, the overall tax burden is 38–53% of the selling price depending on stick size. This indicates no near-term relief for tobacco companies.

Industry Outlook: Boost to Consumption and Growth

FMCG and daily essentials: Strong volume recovery expected, aided by rural growth and festive demand.

Electronics and appliances: Price drops in ACs and TVs to drive consumer interest and sales.

Luxury goods: Price hikes may curb demand in handbags and cosmetics.

Tobacco: Heavy taxation to continue.

Overall, the proposed GST reforms aim to reduce inflationary pressures, stimulate consumption, and support economic recovery. By lowering rates on essentials and key consumer products, the government hopes to unlock demand and strengthen industry growth in the coming quarters.