The GST Council approved rationalising GST rates to two slabs: 5% and 18%, effective from September 22, aiming to simplify taxation and boost consumption.
Industry leaders say the move will stimulate grassroots demand, cushion the economy against global tariff pressures (especially from the US), and create a virtuous cycle of growth.
Key sectors benefiting include FMCG, dairy, medicines, and everyday household items.
Business leaders, including Ashok Hinduja, Anand Mahindra, and Flipkart, welcomed the reform, noting its potential to increase consumption, investment, and market access
The GST rate rationalisation is set to kick off a cycle of growth for India's economy, driven by a major consumption boost, and provide much-needed cushion against the headwinds emanating from "lopsided" tariff regimes being pushed by the US, industry leaders said on Thursday.
The GST Council on Wednesday cleared sweeping changes to the indirect tax regime, approving an overhaul of rates by limiting slabs to 5% and 18% effective from September 22, the first day of Navaratri.
Ashok P Hinduja, Chairman, Hinduja Group of Companies (India), said the GST rate cuts announced across the board augur well for the economy as they will support India's macroeconomic stability by spurring demand at the grassroots level.
"This move was a much-needed consumption booster to cushion the global economic headwinds resulting from the lopsided tariff regimes being pushed by the US. It will have a cascading positive effect on several adjacent sectors, both upstream and downstream," he stated.
Mahindra Group Chairman Anand Mahindra took to social media platform X and batted for more such reforms to spur consumption and drive invest.
"We have now joined the battle… More and faster reforms are the surest way to unleash consumption and investment. Those, in turn, will expand the economy and amplify India's voice in the world. But let's remember the famous exhortation of Swami Vivekananda: "Arise, awake, and stop not till the goal is reached." So, more reforms, please…," Mahindra said in the post.
FICCI President Harsha Vardhan Agarwal said the simplification of the tax structure will offer multiple benefits.
"It will reduce classification disputes, improve compliance and address anomalies on account of inverted duty structure. While there are revenue implications of the announced measures as outlined by the government, the important point to note is the improvement in economic sentiments the reduction in rates will lead to and which in turn will boost consumption demand. This is a major positive for the economy both in terms of lifting growth and containing inflation," he stated.
CII Economic Affairs Council Chairman R Dinesh asserted that the reduction of GST rates on essential goods such as dairy products, medicines and everyday household items, along with reforms in processes and institutional strengthening, will directly benefit consumers, the aspirational middle class, and industry alike.
"The consumption boost has the potential to start a virtuous cycle of growth," he added.
Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart Group, said timely implementation of these reforms ahead of the upcoming festival season will surely give a huge boost to consumption across categories, widen market access, and accelerate our collective journey towards a Viksit Bharat.
Ashishkumar Chauhan, MD & CEO, NSE, said the introduction of GST itself was one of the most significant economic reforms in India's history, laying the foundation for a unified, transparent, and efficient tax regime. The latest measures build on that foundation and take it further.
Aditi Nayar, Chief Economist, ICRA Ltd, said, "While CGST and SGST recorded a double-digit expansion, the growth in IGST and cess collections was tepid, dampening the headline GST increase to 6.5%. Low inflation readings for the WPI and the CPI may partly be dampening the GST growth. The contraction in IGST on imports is puzzling in light of the sharp increase in merchandise imports in July 2025 (that would have been reflected in the August 2025 GST data)." Nitin Rao, CEO, InCred Wealth, pointed out that focus has been to give support to tariff-impacted labour intensive industries and to make goods cheaper.
He highlighted that history has showed that such measures add significantly to GDP growth and a repeat is expected.
Muthoot Microfin CEO Sadaf Sayeed said, "With fiscal and monetary policies moving in tandem, the recent 50 bps rate cut by the RBI coupled with GST rationalisation by the government is set to provide a strong boost to India's economic growth. As rate transmission takes effect, we can expect consumption to rise naturally, further supporting growth momentum".
"We welcome the decision to move a wide range of FMCG products, including chocolates, to the 5% tax slab. This forward-looking reform comes at an ideal time during this festive season. With these tax reductions, the industry can respond quickly -- restoring value in packs, innovating new formats, and supporting retailers nationwide," Ahmed Abdel Wahab, General Manager, Mars Wrigley India, said.
