Kolkata: The morning of Monday, September 22, 2025 will perhaps go down in the history of taxation in the country as only the second most important date after July 1, 2017, when Goods and Services Tax was unveiled in the country paving the way for the much-desired-but-always-elusive one nation one tax. As assured by the nation’s policymakers, more than 90% of articles of daily and common use will cost less as stores open this morning, both in the online and physical variety, providing relief to the stressed wallets of the common individual.
Prime Minister Narendra Modi described the decision to slash GST slabs and rates on hundreds of items as a “Double Diwali Dhamaka” and “GST Bachhat Utsav”. The rhetoric doesn’t seem to be misplaced since it represents a very rare occasion when the prices across the table of items from food items to bicycle, textile to hotel tariff are supposed to go down in one stroke.
What items just became cheaper
Let’s have a quick look at the range of items the prices of which are supposed to decline from today.
GST from 18% OR 12% to 5%: Hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, Bicycles, Tableware, kitchenware, other household articles.
Agricultural goods like tractors, agricultural, horticultural or forestry machinery for soil preparation or cultivation, harvesting or threshing machinery, including straw or fodder balers, grass or hay mowers, composting machines etc
Labour intensive goods such as Handicrafts, Marble and travertine blocks, granite blocks, and Intermediate leather goods
Many drugs and medicines
Various medical apparatus and devices used for medical, surgical, dental or veterinary usage or for physical or chemical analysis
Wadding gauze, bandages, diagnostic kits and reagents, blood glucose monitoring system (Glucometer) medical devices, etc
GST from 5% to Nil: Ultra-High Temperature (UHT) milk, Prepackaged and labelled chena or paneer; chapati or roti, paratha, parotta etc
3 lifesaving drugs & medicines used for treatment of cancer, rare diseases and other severe chronic diseases
GST from 12% OR 18% to 5%: Food items such as packaged namkeens, Bhujia, Sauces, Pasta, Instant Noodles, Chocolates, Coffee, Preserved Meat, Cornflakes, Butter, Ghee etc, Renewable energy devices and parts for their manufacture, Hotel accommodation for rooms less than or equal to Rs 7,500/day, Beauty and physical well-being services used by common man including services of gyms, salons, barbers, yoga centres, etc
GST from 28% to 18%: AC machines, TVs~32 inch (all TVs now at 18%), Dishwashing machines, Small cars, Motorcycles equal to or less than 350 CC, Cement, buses, trucks, ambulances etc, Small Cars and Motorcycles equal to or below 350cc
GST from 12% to Nil: 33 lifesaving drugs and medicines
Correction of long-pending inverted duty structure for manmade textile sector and fertiliser sector
Companies assure of passing the benefit
Most big brands have already issued statements that they will pass on the entire benefit to the consumers. What it means is that they will not pocket the reduced tax and reduce the prices of their products. The government as well as the ruling party leaders have said that they will keep an eye on the markets to ensure the tax cuts result in the same reduction in the prices of products.
The Prime Minister first announced the impending GST cuts in his Independence Day speech from Red Fort and the GST Council formalised the details in a meeting on September 3. (Picture Credit: PTI)
Benefit to the economy
While the common man will predictably be concerned with the direct relief to the wallet and budget, economists and policymakers are also waiting for the salubrious winds of the GST reform to liven up the broad economy. Let’s see how this is expected to play out.
Since prices are going down, people are expected to consume more. This means the aggregate consumption of hundreds of goods in the country will go up. This is expected to generate tailwind for the GDP of the country. It can also gladden the hearts of the private sector who are complaining of less-than-expected demand levels and, therefore, are not making new investments.
Waiting for a virtuous cycle
If they are encouraged to make new investments, if could generate fresh employment which is expected to generate more demand of goods and services, thus triggering a virtuous cycle. It is also important from another perspective — it could help offset some of the negative impact of the US 50% retaliatory tariff on imports of a whole lot of goods from India. Experts have indicated that the tariffs initiated by US President Donald Trump could erode the GDP growth rate by about 60 basis points of the GDP in FY26.
It is the expectation of this virtuous cycle that has prompted the government to accept a revenue sacrifice of about Rs 48,000 crore, which will result in the short term, thanks to the immediate drop in prices. However, increased demand would offset the lost revenue in a few months, think analysts.
The policymakers are now therefore trying promote Swadeshi and reducing dependence on external markets. Broaden and deepen the domestic markets, they are saying. PM Modi have also referred to the double engine of reduced GST and Income Tax relief — no tax up to annual income of Rs 12 lakh — as the new power in the wallets of the middle class to trigger consumption.