India's economy experienced a significant surge in spending during the Navratri festival, spurred by the implementation of "GST 2.0," as highlighted in a recent report by Union Minister Ashwini Vaishnaw. The Goods and Services Tax (GST) Council's decision to implement sweeping changes to GST rates, effective from September 22, 2025, the first day of Navratri, has been hailed as a transformative step for the economy.
The GST 2.0 reforms, including rate rationalization and simplification of the tax system, aim to ease the lives of citizens and provide an economic boost. These reforms are expected to simplify taxation, reduce rates on daily-use goods, and stimulate consumption, potentially adding ₹20 lakh crore to the GDP. Prime Minister Narendra Modi has described the implementation of GST 2.0 as a "bachat utsav" (savings festival) and the first step towards "aatmanirbharta" (economic self-reliance) for India. He also pointed out that the middle class would benefit from the double bonanza of GST cuts and income tax exemptions, leading to savings of nearly ₹2.5 lakh crore for households.
The GST Council approved significant rate cuts across multiple sectors, with Finance Minister Nirmala Sitharaman describing them as a Diwali gift for the nation. Items of daily use, such as hair oil, shampoo, toothpaste, soaps, toothbrushes, and shaving cream, now attract 5% GST, down from 18%. Dairy products like butter, ghee, and cheese, as well as packaged snacks like namkeens, bhujiya, and mixtures, have seen their rates reduced from 12% to 5%.
The automobile sector has also benefited from the reforms. Small cars and motorcycles with engine capacities below 350cc now have a GST rate of 18%, reduced from 28%. Buses, trucks and ambulances also saw a GST reduction from 28% to 18%.
According to Vaishnaw, the tax cuts under GST 2.0 are expected to result in an additional ₹20 lakh crore in consumption this year. He also noted a record 25% increase in electronics sales during Navratri, attributing it to the new tax reforms. This surge in demand for electronics goods is expected to positively impact electronics manufacturing, which is already growing at a double-digit CAGR.
Union Minister Piyush Goyal noted the surge in vehicle sales during Navratri, with Maruti Suzuki selling 1.65 lakh cars in the first eight days, Mahindra's sales increasing by 60%, and Tata selling over 50,000 vehicles. The electronics sector has also broken records.
The GST Council has also made significant changes to GST rates for medicines and medical devices. Certain drugs and medicines now have a lower tax structure of 5%, compared to the earlier 12%. Certain life-saving drugs and medicines will attract zero tax, compared to the previous 12% GST.
However, some items have moved to a higher rate of 40%, including motorcycles exceeding 350 cc, yachts, aircraft for personal use, tobacco, pan masala, aerated drinks, carbonated drinks, revolvers, and pistols.
These GST 2.0 reforms have been described as the biggest reforms in post-independence India. The International Monetary Fund (IMF) has revised its forecast for India's growth to 6.6%, highlighting the country's strong economic performance amid a volatile global scenario.
