GST Council Meet 2025: All Eyes on Consumer Sector; Expectations High on Tax Relief and Demand Push

The fast-moving consumer goods sector will take centre stage at the 56th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, which begins tomorrow on September 3rd and 4th. Prime Minister Narendra Modi already hinted at "Next Generation GST Reforms" by Diwali 2025 in his Independence Day address; expectations are running high that the government will announce measures to reduce the tax burden and pull up demand, particularly in households and MSMEs.

Consumer Sector Looking for a Revival

India's consumer sector has been under pressure in recent years, struggling with inflation, price hikes, and global macroeconomic pressure. However, early signs of recovery were in the first quarter of FY26, where growth in both demand and volume was seen across several categories.

GST Rate Rationalisation in Focus

At present, the GST structure is divided into multiple slabs, which include 5%, 12%, 18%, and 28%, which create a lot of complications and price gaps between organised and unorganised players.

The government plans to abolish the 12% GST slab and bring most products under a 5% rate. This rationalisation covers many essential FMCG products like tooth powder, packaged snacks, ketchup, jam, dairy products like butter, cheese, and ghee, packaged juices, noodles, and pasta.

Similarly, the 28% slab will be moved to 18%, and a new 40% slab is expected for sin and luxury goods.
Lower GST rates could allow companies to either reduce product MRPs or increase grammage, making goods more affordable and stimulating consumption, especially in rural India where price sensitivity remains high.

The tax cuts will likely allow companies to increase product grammage or reduce MRP, making goods more affordable while increasing volume consumption, especially in rural India, where price sensitivity is very high.

What Experts Are Saying

Economists at Bank of Baroda in a report, estimate that the rationalisation of slabs could add Rs. 0.7-1 lakh crore to consumption, translating to about 0.2-0.3% of GDP from September onwards.

Economists at Bank of Baroda estimate that changing the GST slabs could boost household spending by around Rs. 70,000 crore to Rs. 1 lakh crore. This extra consumption would add about 0.2-0.3% to India's GDP starting from September.

They noted, "About 8.5% of the Consumer Price Index (CPI) basket may see price moderation, particularly in food and non-food essentials, which could also help in cooling core inflation. However, the final impact will depend on how the 40% slab is structured, as the government has not yet disclosed which commodities will be included under this category."

Current GST Rates Across Key Categories

Home Care: Detergents, dishwashing liquids, and air fresheners are taxed at 18%.

Personal Care: Products such as shampoos, soaps, hair oils, and toothpaste attract 18%, with some exceptions like tooth powder at 12%.

Food & Beverages: Rates vary on a large scale, with milk not taxed and GST at 0%, yoghurt/curdtaxed at 5%, noodles and pasta at 12%, biscuits and cookies at 18%, and packaged snacks between 5 and 12%.

Discretionary Spending: Footwear and apparel fall in the 5 to 18% range, depending on product type and price point.

Consumer Sector Outlook Ahead

According to a Centrum report, "the FMCG industry grew about 14% year-on-year in Q1 FY26, with 6% growth in volumes. While smaller companies have captured market share in recent years, GST rationalisation is expected to tilt the balance in favour of larger consumer goods players, strengthening their competitiveness."

"Rural markets, which have been growing faster than urban centres, are likely to be the biggest beneficiaries of lower GST rates. Government schemes like MNREGA, coupled with tax cuts that boost disposable incomes, are expected to support consumer sentiment further," the report further said.