The GST Council’s decision to slash tax rates on everyday essentials and personal-use products ahead of the festive season is expected to revive domestic consumption, lift rural demand, and strengthen growth in the FMCG sector, industry leaders said on Thursday.According to news agency PTI, FMCG companies plan to pass on the benefits to consumers either by increasing grammage or cutting stock-keeping unit (SKU) prices, with analysts estimating price drops of 8–10% depending on brands, translating into 2–3% growth for the industry.

Calling the move “game changing”, Marico MD & CEO Saugata Gupta said, “By making essential consumer products more affordable, especially in the run-up to the festival season, these reforms will play a pivotal role in stimulating economic momentum and building long-term growth in the FMCG sector.”Dabur CEO Mohit Malhotra termed it a “timely and transformative move,” stressing that the cuts will make soaps, shampoos and toothpastes more affordable, while driving demand in rural and semi-urban markets.Godrej Consumer Products CFO Aasif Malbari welcomed the decision, stating the company was committed to passing on benefits to consumers. The All India Consumer Products Distributors’ Federation (AICPDF) said the reduction would improve distributor and retailer liquidity by Rs 4,000–5,000 crore, while boosting rural consumption by an estimated 8–10% in the next two quarters.

Shares of leading FMCG firms surged following the Council’s approval. Britannia, Dabur, HUL, Nestlé and Emami all logged strong gains on the BSE, while consumer durables and cement stocks also rallied. The GST cuts cover a wide range of items, from hair oil, shampoo, toothpaste and soap to food products like butter, dry fruits, ice cream, biscuits and beverages, with rates slashed to 5% from 12% or 18%. Cement will now attract 18% GST instead of 28%.As per PTI, Joy Personal Care Chairman Sunil Agarwal said rural India, already driving FMCG growth for six quarters, will see further demand strength. Industry executives added that retailers are bracing for strong festival sales rebound as companies implement revised prices on existing stock.Grant Thornton Bharat’s Naveen Malpani noted that the cuts could lead to price drops of 8–10% depending on supply chain efficiencies, further stimulating consumption.Industry experts believe the reforms will add 2–3 percentage points to FMCG sector growth, which is currently expanding at 10–12% annually, making the reform a “landmark step” ahead of the festive season.

The government’s announcement of Goods and Services Tax (GST) rationalisation under GST 2.0 signals a major change in India’s economic approach, moving from capex-led spending to a consumption-driven model, according to a report by Axis Securities.“The government has now shifted gears from capex-oriented spending to consumption-led spending,” the brokerage said, adding that the February 2025 Budget had already started this transition by introducing tax reliefs for rural households and the middle class.

As per news agency ANI, the report noted that over the last decade, infrastructure projects like roads, bridges and metro networks defined government policy. However, GST 2.0, approved in the 56th GST Council meeting on September 3, marks a new phase aimed at boosting demand. The reforms rationalise the structure by reducing slabs from four to three, scrapping the 12% and 28% categories. Most items now fall under 5% and 18%, while a 40% slab is reserved for sin goods. Certain essentials have been placed under a Nil GST rate to directly spur consumption. These changes will take effect from September 22, coinciding with Navratri’s first day.

As per ANI, Axis Securities said the move is expected to benefit MSMEs and SMEs and revive credit growth, while boosting consumer demand in sectors such as durables, retail, FMCG, automobiles, cement, real estate, and building materials. The report added that higher discretionary income will strengthen the consumer discretionary segment, eventually reviving private capex, which has remained weak.Union commerce and industry minister Piyush Goyal also described the GST reforms as “game-changing” and the “biggest reform since independence,” reported news agency PTI. He said the move would support demand across sectors, benefit every consumer, and play an important role in India’s growth journey towards becoming a developed country by 2047.

“Every stakeholder in the country, every consumer, stands to benefit,” Goyal said, urging industry to pass on the benefits. He credited Prime Minister Narendra Modi for leading what he called the “biggest ever reform that India has seen since independence.”The minister added that the reforms, coming ahead of the festive season, are like a “Diwali gift” that will not only reduce taxes on daily essentials but also create a virtuous cycle of greater demand, investment, and job creation.

The government has decided to seek approval from the International Monetary Fund (IMF) to redirect the levy collected from captive power plants (CPPs) to electricity consumers.

Already, a proposal has been approved that the CPP levy will be utilised to provide relief to consumers.

The issue was taken up in a recent meeting of the Economic Coordination Committee (ECC).

During discussion, the Power Division informed the ECC that while approval of the mechanism was being sought.

Its detailed modalities pertaining to transition, calculation and additional benefits to consumers would be finalised later.

The Finance Division was of the opinion that the levy would form part of the overall budget of the Power Division for the current financial year.

While remaining within the Memorandum of Economic and Financial Policies (MEFP) framework agreed with the IMF.

However, the Power Division maintained that the relief to consumers would only be possible if considered over and above the regular budget of the division.

The ECC directed the division to seek necessary clarification from the IMF.

The Petroleum Division backed the proposal and shared its views on the mechanism, which had already been incorporated.

The Ministry of Commerce proposed that the benefit be provided only to industrial consumers.

However, it was found contradictory to the Act, which stipulates that the levy shall be utilised to pass the benefit on to all categories of consumers.

The Law Division endorsed the proposal, stating that no further legal comment was required.

The National Electric Power Regulatory Authority (Nepra) had no objection and recommended that the mechanism for providing relief to consumers be made part of the monthly fuel cost adjustment (FCA) request submitted by the Central Power Purchasing Agency-Guarantee (CPPA-G).

The Finance Division and the Ministry of Industries & Production did not come up with their views despite multiple reminders and were given the opportunity to do so during the meeting.

The Ministry of Energy (Power Division) said that Parliament had enacted the Off the Grid (Captive Power Plants) Levy Act, 2025 to impose a levy on natural gas-based CPPs in order to facilitate their transition to the electricity grid.

Section 4 of the Act provides that the concerned divisions, under the Rules of Business, 1973, shall calculate the rate of the levy by considering the difference between the electricity tariff of the industrial B-3 category notified by Nepra and the self-generation cost of CPPs at the gas tariff notified by Ogra (Oil and Gas Regulatory Authority).

In accordance with the Act, the levy shall be set initially at a fixed 5% margin over and above the power tariff, which shall increase to 10% from August 1, 2025, 15% from February 1, 2026 and 20% from August 1, 2026. It will remain at that level thereafter.

Section 2 of the Act provides the legal basis for the imposition of the levy and empowers Ogra to determine the applicable tariff.

The mechanism for calculation of the levy for CPPs has been modeled on the similar provisions notified earlier.

Furthermore, the Act authorises the federal government to notify the categories of power consumers eligible to receive the benefit of the levy.

The Ministry of Energy (Power Division) explained the mechanism for passing on the benefit to consumers.

The proposed mechanism provides that the Power Division will ensure the remittance of the collected levy to the Finance Division at the close of each month.

Based on data compiled by the Power Planning & Monitoring Company (PPMC), the amount to be passed on to electricity consumers will be calculated.

PPMC will share this information with Nepra, with a request to adjust it in consumer tariffs.

Nepra will then include the benefit in the FCA and carry out necessary due diligence.

It was noted that the benefit of the levy, collected in January, would be given to electricity consumers in the billing month of March, based on consumption in January.

In light of the above, the approval of the ECC was sought for passing on the benefit to all electricity consumers and for authorising the Power Division to implement the mechanism in consultation with Nepra under Section 31 of the Nepra Act.

Nepra will evaluate the monthly data provided by PPMC to determine the per-unit rate of the levy to be passed on to eligible consumers as per the approved mechanism and notify its determination every month along with the FCA.

The Ministry of Energy (Power Division) solicited approval of the ECC for the proposal.

The ECC considered a summary titled “Relief to Power Consumers on Account of Captives Transition Levy” and approved the mechanism.