GST Overhaul May Slash Prices on Dairy & Consumer Goods
India is set to roll out a significant Goods and Services Tax (GST) overhaul, likely unveiled during the 56th GST Council meeting in September or October 2025, pending approval from the Group of Ministers (GoM) .
Under the current draft, the multi-slab GST system will be simplified into two main rates: 5% and 18%, effectively eliminating the existing 12% and 28% slabs . This structure aims to lower the tax burden on essential goods while addressing fiscal efficiency.
Key goods such as ghee, butter, packaged foods, fruit juices, and packaged coconut water, currently taxed at 12%, may move to the 5% slab. Similarly, small cars and some consumer durables, previously taxed at 28%, are expected to be reclassified under the 18% slab .
If implemented, these reforms are projected to reduce retail prices, stimulate consumer spending, and encourage local demand, particularly in the run-up to Diwali .
The proposed GST overhaul could be a game-changer for multiple sectors of the Indian economy. For the dairy and packaged foods industry, lowering GST from 12% to 5% on essentials such as ghee, butter, packaged milk products, fruit juices, and coconut water will make these items more affordable, especially for price-sensitive and rural consumers. This reduction is expected to boost demand for branded packaged foods, giving FMCG companies a chance to expand penetration and drive volume growth after a period of sluggish consumption.
The automobile sector, particularly small cars, stands to gain significantly from the reduction of GST from 28% to 18%. By improving affordability, this reform could stimulate sales in the entry-level segment, benefiting automakers like Maruti Suzuki, Hyundai, and Tata Motors, while also triggering higher demand for financing and insurance products linked to auto purchases.
For the broader consumer durables market, GST rationalisation will help revive demand by narrowing the gap between essential and discretionary spending. Lower prices are expected to encourage middle-class households to resume spending on appliances and electronics, further energising retail momentum during the festive season.
From a macroeconomic perspective, while the government may see short-term fiscal stress due to an estimated $20 billion annual revenue loss, the reform is likely to act as a stimulus by reviving household consumption and potentially boosting GDP growth by 0.6–0.8%. With its timing around Diwali, the reform could amplify festive demand, creating a positive consumption cycle across industries.
In essence, the GST overhaul is poised to act as a consumption catalyst, supporting FMCG, dairy, autos, and consumer durables, while reinforcing India’s domestic demand story in the face of global economic uncertainties.
Source : Dairynews7x7 Aug 19th 2025 by various sources