India’s sweeping Goods and Services Tax (GST) rationalisation, approved on Wednesday, is being hailed by business leaders as a major step to spur consumption, lift growth, and soften the impact of “lopsided” tariff regimes from the United States.
The GST Council decided to compress the current rate structure into two slabs of 5% and 18%. The changes, described as one of the biggest overhauls since the tax’s rollout, will come into effect on September 22, coinciding with the start of Navaratri.
Ashok P Hinduja, chairman of Hinduja Group of Companies (India), said the move would strengthen India’s economic base by stimulating demand at the grassroots.
“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 noted.
Mahindra Group chairman Anand Mahindra, in a post on X, called for more reforms to sustain momentum.
“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…,” he wrote.
Harsha Vardhan Agarwal, President of FICCI, said the simplification would have 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,” he explained.
“This is a major positive for the economy both in terms of lifting growth and containing inflation,” the FICCI president further added.
Industry bodies underlined that essentials such as dairy, medicines and household items would directly benefit. R Dinesh, Chairman of CII’s Economic Affairs Council, said the step “has the potential to start a virtuous cycle of growth”.
Retail and consumer-facing sectors see the timing as particularly favourable. Rajneesh Kumar, chief corporate affairs officer of Flipkart Group, said the festive season rollout would widen market access and accelerate the collective journey towards a Viksit Bharat.
Mars Wrigley India’s general manager Ahmed Abdel Wahab welcomed the cut on FMCG products, including chocolates, saying it would allow the industry to innovate and “support retailers nationwide”.
Ashishkumar Chauhan, MD & CEO of NSE, said that GST had been one of the country’s most important economic reforms, creating a unified, transparent and efficient tax framework. He added that the latest changes build on that foundation and push the reform agenda further.
InCred Wealth CEO Nitin Rao highlighted support for labour-intensive industries and cheaper goods. He said that measures like these have helped adding to the GDP growth, historically, and a repeat is expected.
Economists, however, pointed to uneven tax receipts. ICRA’s chief economist Aditi Nayar 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 per cent. 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).”
Muthoot Microfin CEO Sadaf Sayeed said the combination of the Reserve Bank’s recent 50-basis point rate cut and GST reforms would deliver a strong policy push. “As rate transmission takes effect, we can expect consumption to rise naturally, further supporting growth momentum,” he said.