The recent changes in Goods and Services Tax (GST) have provided some relief to consumers by lowering the tax burden on a range of goods and services. However, the benefit has not translated into an equally large improvement in household budgets, as rising prices across several categories have absorbed part of the gains.
For consumers, this means that while some products may have become cheaper or seen a lower tax incidence, the overall monthly expenditure may not have fallen by the same extent.
Within the multiple segments that saw rate reduction, with some of the slabs and cess on most goods being removed, automobiles have emerged as the clearest winner. Consumers initially paid less, demand accelerated and sales touched new highs.
FMCG Sector:
In the Fast-Moving Consumer Goods (FMCG) sector, the outcome has been more mixed. In the sector, GST on several essentials was reduced to 5% from 12% or 18%, initially prompting average price cuts of around 10%.
Firms have raised prices by 6-7% to manage higher raw-material, energy and logistics costs, including inflation linked to the West Asia conflict.
Mayank Shah, chief marketing officer at Parle Products said, “Consumers are still better off by 2-3%,” as reported by Times Of India. He cautioned that companies may need another round of price increases closer to Diwali if input-cost inflation persists.
Further, Nestle India said the GST reduction provided a “positive impetus to consumption”.
Ronak Shah of Equirus Securities said the GST reduction has provided some cushion against cost inflation, rather than translating into a meaningful increase in category consumption.
Apparel sector:
GST on clothing priced above Rs 2,500 rose from 12% to 18%, affecting festive and occasion wear.
“The GST 2.0 reforms or reductions have not really impacted prices to a great degree,” said Rahul Mehta, chief mentor at the Clothing Manufacturers Association of India, as quoted by TOI.
Automobile:
On the GST on automobile sector, Jitin Makkar, senior vice-president and group head, corporate ratings, ICRA said, “Assessed over the past 11-12 months since implementation, the GST rate rationalisation could be said to have delivered a notable consumption sentiment boost.”
As per ICRA, automobile retail sales reached 29 million units during the 11 months ended Aug 2026, rising 20% from a year earlier. Passenger vehicle registrations grew 22%, while two-wheelers rose 20%, commercial vehicles 19% and tractors 23%.