Dear Readers,

If you are planning festive season shopping or family dinners, here’s a big cheer: from September 22, many essential products will move out of the GST net, while several others will see steep reductions.
The rate rationalisation, dubbed GST 2.0, could not have been timed better as it arrives with the festive season, delivering a direct bonanza to consumers.

This means GST will vanish from many essential goods and shrink dramatically on items like cars, a win for both households and industry. The strategic revamp is expected to accelerate growth, strengthen India’s macroeconomic foundation, and, most importantly, boost consumption at a time when it is most needed.

Beyond rate cuts

GST 2.0 is about more than slashing rates. By fixing inverted duty structures in sectors such as textiles and fertilisers and by streamlining input tax credit flows, it seeks to clear long-standing bottlenecks that have choked efficiency and liquidity.
These reforms come at a critical juncture. With the US imposing steep tariffs and calls growing for 1991-style reforms that once transformed India’s economy, GST 2.0 is seen as the first of a new wave of big-ticket changes spanning land, labour, and ease of doing business.


The government’s idea of GST

This is the first major overhaul of GST since its introduction eight years ago.
To my mind, restructuring into just two slabs is not simply about a feel-good rate cut. It is a strategic attempt to nudge industries into restarting the long-delayed capex cycle.

The aim is clear: push consumption-led growth and soften the blow from tariffs that threaten GDP growth this year. Leading financial institutions such as SBI, BofA, and Nomura have already projected a GDP lift of 0.1–0.16 percentage points from GST 2.0, with hopes that falling inflation plus this tax tailwind may even prompt the RBI to ease interest rates.


The ball is in the industry’s court

The government has fired its shot. Now the question is: Will consumers spend, and will India Inc finally unleash its animal spirits?
On paper, the backdrop is ideal. Markets are buoyant, new investors abound, inflation is low, the current account deficit is contained, interest rates are benign, and liquidity is flush.

Yet, corporate India remains hesitant. Companies are sitting on mountains of cash, funnelling them into startups via family offices, while large-scale industrialisation and manufacturing expansion remain muted.

Public capex is at a record high of over Rs 11 lakh crore, but private investment continues to lag. Beyond geopolitical uncertainty and tariff shocks, the elephant in the room is demand: simply put, there hasn’t been enough of it to justify bold new investments.
With GST restructuring slashing rates, from 18% to 5% on household items, and reduction in others, the hope is that demand will roar back, nudging industry into capacity expansion.

If that happens, the economy will get the booster it badly needs.
Commerce Minister Piyush Goyal has already urged industry to pass on all GST rate cut benefits to consumers, while encouraging buyers to choose Indian products. The government is using the tariff challenge as a springboard to push reforms that could fast-track the Viksit Bharat vision.

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