For years, consumers have juggled complex GST slabs — 5%, 12%, 18%, and 28% — without always feeling the benefit. That changes now.
With the new GST rationalisation effective Monday, Sept. 22, the structure has been simplified to mainly 5% and 18%, and the impact on household budgets could be significant.
On the eve of Navratri, Prime Minister Narendra Modi coupled the GST announcement with a broader 'Swadeshi' message, urging Indians to take pride in locally-manufactured items. He also announced, for the first time, that when combined with recent income tax relief, these changes are projected to leave Indians with around Rs 2.5 lakh crore in extra savings.
Emphasising that the dream of “one nation, one tax” was realised with the rollout of GST in 2017, the PM said the upcoming reforms will simplify compliance and ease business operations, marking a significant step towards self-reliance, timed with the very first day of Navratri.
The Rs 2.5 lakh crore figure isn't merely a statistic. It translates into stronger household budgets, higher demand for both essentials and aspirational goods, and a ripple effect that could energise the broader economy during the festive season.
Indian Households
Take the example of someone earning Rs 50,000 per month. Suppose they spend half of it (Rs 25,000) on daily essentials such as food, personal care, and medical bills.
With rate cuts covering about Rs 15,000 of this spend, the monthly savings work out to nearly Rs 1,275. That’s effectively a 2.55% increase in disposable income, extra money in hand that can either ease the burden of rising expenses or go toward small luxuries.
For the average family, this could mean buying that long-delayed appliance or setting aside more for a child’s education fund. At scale, these incremental savings fuel India’s consumption story, creating a buffer against global economic uncertainties.
"This rate rationalisation and policy thrust is a direct and meaningful boost for Indian families and businesses alike," said Saurabh Agarwal, tax partner at EY.
"On one hand, households are left with more disposable income, fuelling domestic consumption. On the other hand, MSMEs and large industries gain operational relief through simpler structures and reduced disputes. The government’s trust in not enforcing strict anti-profiteering measures places the onus on industry to honour that trust and fully pass on the benefits to consumers," he said.
The Swadeshi–PLI Engine
The Prime Minister's push for 'Swadeshi' and 'Atmanirbhar Bharat' is also finding its execution engine in the Production-Linked Incentive (PLI) schemes. The success of the mobile phone sector, transitioning India into a major global exporter, demonstrates the program’s powerful potential.
As new manufacturing facilities are installed across various sectors, it is crucial to ensure maximum policy impact. A constructive review of unutilised PLI funds could help broaden the product list under existing schemes or reallocate resources to other sectors ready for immediate growth.
To counter global trade uncertainties, reviving a Focus Market Scheme (FMS), similar to one used in the past, is advisable. Targeted export support would allow Indian firms to rapidly penetrate new markets, diversify risks, and strengthen the manufacturing base envisioned by the Swadeshi movement, ensuring sustained and resilient economic growth, said Agarwal.
Between GST 2.0's household savings and the PLI-driven Swadeshi manufacturing push, India is building a dual-engine strategy empowering consumers, strengthening domestic industry, and creating a more resilient economy in an uncertain global environment.
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