New GST rates implementation has set the stage for consumption led growth of India: Report

New Delhi [India] September 24 (ANI): India's Goods and Services Tax (GST) 2.0, has been hailed as a "GST booster shot" for consumption-led growth, with major reliefs announced for sectors including FMCG, MSME, textiles, automobiles, healthcare, insurance, electronics and construction, noted a report by the Union Bank of India.
Rolled out on September 22, the rationalised GST rates has set the stage for major sectoral transformation by rationalising tax slabs, simplifying compliance, and addressing long-standing issues such as the inverted duty structure.
Daily-use products, packaged foods, and personal care items have been shifted to the 5 per cent slab from 12 to 18 per cent earlier. Companies are expected to cut prices by 4 to 6 per cent, improving affordability and boosting rural demand. Staples such as paneer, chapati and khakhra have even been moved to the zero-tax bracket, making essentials like these cheaper.
Textile industry hit by the US tariffs, stands out as one of the biggest beneficiaries of the chnages. GST on synthetic yarn, staple fibre, and unwoven fabrics has been reduced to 5 per cent, while garments up to Rs 2,500 are now taxed at 5 per cent instead of 12 per cent. This correction of the inverted duty structure will ease working capital blockages for spinners and weavers, boosting competitiveness. However, garments above Rs 2,500 will now attract 18 per cent GST, raising costs for middle-class consumers. Overall, the sector is expected to witness stronger demand and healthier cash flows.
GST cuts on two-wheelers, small cars, buses, ambulances, and auto parts from 28 per cent to 18 per cent will make vehicles cheaper, with compact cars already seeing price drops of up to Rs 2.5 lakh and two-wheelers are likely to become more affordable with likely price reductions of between Rs 8,000 to Rs 15,000. Demand is expected to rise by 12 to 15 per cent, particularly in rural markets. The move is also seen as a relief for MSME suppliers in the auto supply chain, who could save up to Rs 6,000 crore annually. However, luxury SUVs and premium motorcycles have been moved to the 40 per cent slab to maintain revenue balance.
In the Electronics and consumer durables sector, large appliances such as ACs, refrigerators, and dishwashers are likely to become cheaper by 8 to 9 per cent, as they have been moved from the 28 per cent slab to 18 per cent. This is expected to boost demand during the festive season and improve affordability in Tier II and Tier III markets. Small appliances like mixers and microwave ovens also benefit from rationalisation, making household products more accessible.
In the Healthcare and insurance sector, the reform provides significant relief to patients and policyholders. GST has been removed on 33 lifesaving drugs, including those for cancer and rare diseases, while health and life insurance policies have been exempted from GST altogether. GST rates on medical devices and diagnostic kits have been reduced from 12-18 per cent to 5 per cent, is likely to lower treatment costs and encourage wider insurance coverage
In the construction sector, key inputs such as cement from 28 per cent to 18 per cent and particle boards and sand lime bricks now only at 5 per cent GST, is expected to reduce project costs and improve viability. This could provide a boost to the infrastructure and housing sectors
Overall, GST 2.0 has ushered in structural relief across critical sectors, the reforms are likely to accelerate growth by supporting consumption, easing compliance, and strengthening MSMEs, even as luxury and sin goods have been placed in the higher 40 per cent bracket to safeguard revenue loss. (ANI)