On September 22, 2025, India introduced major GST reforms with the aim of simplifying taxation and making the taxes more just. Under the new system, almost all goods and services come under two main slabs i.e., 5% for essentials and 18% for most products, while luxury and sin items such as luxury vehicles and cigarettes are subjected to a significantly higher tax of 40%.
Nearly all normal consumables like milk, bread, life and health insurance and some packaged foods have been made tax-free or are charged at very low rates.
The changes have lowered the prices of electronics, refrigerators, cars and other household goods and thus consumers have found these goods more affordable which makes it a direct relief for families and they have more purchasing power.
Also, businesses will enjoy the ease of their compliance with the faster registration and refunds, which are the main factors for the smooth performance of the businesses. The key purpose of ‘GST 2.0’ is to have a more transparent and growth-sensitive tax regime, which is the taxpayer's friend as well as the industries.’
We asked industry leaders and subject matter experts to shed light on the impact that GST reforms will have on lives of the common Indian consumer and the Indian economy. Let’s hear what they had to say.
A Positive Move for Indian Consumers
Most leaders view the GST rationalization as a positive move. The most imminent impact will be the boost on consumer spend and morale.
“I do see this move as a positive step for the Indian consumer; it is indeed a positive and progressive step towards enhancing consumer confidence and streamlining the indirect tax landscape,” says 
Sneha Oberoi, CFO, Suzuki Motorcycle India.
The simplification of taxation comes as another major benefit of this reform. “Simplifying the tax structure to just two slabs—5% and 18%—brings clarity and transparency, which is essential for building consumer confidence. By reducing complexity, it also lowers compliance costs for businesses, which can translate into better pricing and improved value for customers,” adds Sneha.
Sneha believes that on a macroeconomic perspective, this reform will enhance disposable income, especially for middle-income households, thereby stimulating demand across several sectors.
A similar sentiment is echoed by 
CA Shallu Arora, CFO, Sirca Paints India. She says, “The GST Council’s move to rationalize the tax structure into just two slabs — 5% and 18% — is indeed a significant reform. I see this as a positive step for the Indian consumer, primarily because it simplifies taxation, reduces ambiguity, and directly increases disposable income. By lowering the tax incidence on many essential and mass-consumption items, this measure is expected to free up purchasing power, thereby stimulating demand.
Shruti Mehndroo, VP Finance, Liberty Mutual Insurance,
says, “The GST rationalization marks one of the most significant tax reforms since its launch in 2017. By consolidating multiple rates into two principal slabs—5% and 18%, with a higher 40% bracket for luxury and sin goods - the government has sent a strong signal of its intent to simplify taxation, reduce compliance costs, and stimulate consumption. The reform is not only about lowering tax rates but about creating a more predictable, growth-oriented framework for businesses and consumers alike.”
Booster for Demand across Key Industries
As the GST rationalization comes into effect, it is expected to act as a stimulant for domestic demand across sectors such as FMCG, consumer goods, electronics etc. calling it a bold move, 
Saradha Govindarajan, Head of corporate development, InCorp Advisory remarks about positive impact, the move is expected to make. She says, “The recent GST rationalization, which reduces the structure to two slabs of 5% and 18%, is a bold step that will make India’s tax system simpler and more predictable. This reform is expected to put more disposable income in consumers’ hands by lowering taxes on essentials—especially benefiting FMCG, healthcare, automobiles, and consumer electronics. These moves should stimulate domestic demand, encourage business formalization, and support growth across diverse sectors.”
Affordability of essential goods comes as a strong po
sitive impact which will benefit consumers and businesses alike. Alka Saxena, CFO, Redcliffe, says, “GST rationalization would entail wider affordability for essentials and consumer staples, leading to higher aggregate demand, consumption and buoyancy. The simplified essentially two-rate structure reduces compliance costs, prompts voluntary compliance and supports businesses, MSMEs and manufacturers. This overhaul is expected to boost direct household spending, encourage formalization and provide a short-term stimulus that can create a virtuous cycle of investment, job creation and economic resilience.”
Long-Term Outlook Signifies Growth
GST collections are a key source of revenue for state governments and there were concerns regarding GST reforms leading to significant revenue loss for state governments, as flagged by states such as Jharkhand. However, the overall long-term impact on the Indian economy is expected to be positive. Saradha explains, “While the government faces a potential short-term revenue loss, the wider impact is likely to be positive, as higher consumption, better compliance, and improved investment climate can set the stage for more inclusive and resilient long-term economic expansion”.
Speaking about the impact of GST reforms on the Indian economy in the long run, Alka Saxena believes them to have a multiplier effect. She says, “In the long run, GST rationalization reforms are likely to result in a multiplier effect on economic growth, broadening the tax base, enhancing voluntary compliance and making Indian GST laws aligned with Global GST laws.”
It all ties back to a boost in consumption. She further explains, “Lower rates will drive consumption, improve industry competitiveness (especially in exports and manufacturing) and support inclusive growth for MSMEs, artisans and rural sectors. While an initial revenue dip is expected, strong consumer demand and economic expansion can restore and even increase fiscal revenues over time, positioning GST as an active driver of development rather than just a tax collection tool; and also for sailing through US Tariff concerns.”
Shruti Mehendroo also weighs in on the long-term impact of GST reforms on the Indian economy. She says, “Beyond sectoral impact, the economy as a whole could see household consumption rise, GDP growth adds 0.3–0.5%, and inflation moderate by up to 100 basis points. Over the long term, this simplification should encourage formalization, compliance, and investment, making GST not just a tax reform but a catalyst for inclusive economic growth.”
Business leaders have an optimistic outlook on the impact of GST reforms of the Indian economy. The Indian consumer is the happiest as these reforms come into action at the festive season, when demand for consumer products is at the highest.
GST reforms look like a gift from the Modi government to the Indian consumer. How this gift will impact the economy in the long-run is something that we have to wait and watch, but the outlook is optimistic.
