Prime Minister Narendra Modi called the decision a “Double Diwali Dhamaka” and “GST Bachhat Utsav”, as hundreds of products — from food to textiles and hotel stays — have become cheaper overnight. Major brands have already promised to pass on the benefits to consumers.
Key GST Rate Reductions
From 18%/12% to 5%
- Hair oil, soaps, shampoos, toothbrushes, toothpaste
- Bicycles, tableware, kitchenware, household articles
- Agricultural machinery like tractors, harvesters, compost machines
- Handicrafts, leather goods, marble, granite
- Many medicines and medical devices (bandages, glucometers, diagnostic kits)
From 5% to Nil
- UHT milk, packaged paneer, roti, paratha, parotta
- Three lifesaving drugs for cancer, rare and chronic diseases
From 12%/18% to 5%
- Packaged food items: namkeens, bhujia, sauces, pasta, noodles, chocolates, coffee, preserved meat, cornflakes, butter, ghee
- Renewable energy devices and components
- Hotel accommodation ≤ Rs. 7,500/day
- Services: gyms, salons, barbers, yoga centres
From 28% to 18%
- Air conditioners, dishwashers, TVs (all sizes now at 18%)
- Small cars, motorcycles (≤ 350 cc)
- Cement, buses, trucks, ambulances
From 12% to Nil
- 33 lifesaving medicines
Structural Corrections
GST 2.0 also addresses inverted duty structures in the textile and fertilizer sectors.
Economic Impact
With prices reduced across categories, consumption is expected to rise sharply. Economists say this will boost GDP growth and encourage private sector investments, potentially generating fresh employment. The government estimates a short-term revenue sacrifice of Rs. 48,000 crore, which analysts believe will be offset by higher demand in the coming months.
The move is also seen as a buffer against the negative impact of the US imposing 50% retaliatory tariffs on Indian exports. Policymakers argue that strengthening domestic demand is the best defense against global headwinds.
“Double Engine” Boost for Middle Class
PM Modi has highlighted the combined effect of reduced GST and new Income Tax relief — no tax up to an annual income of Rs. 12 lakh — as a powerful tool to put more money in the hands of the middle class, further driving consumption and growth.
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