Reduced GST Rates on Basic Necessities: Are You Making Wise Choices While Shopping?
In an exciting development, several major companies and online platforms have announced price reductions for a variety of goods, as they aim to boost consumption and tap into positive buyer sentiment ahead of the upcoming Goods and Services Tax (GST) 2.0 reform.
The GST 2.0 reform, scheduled to commence on September 22, 2025, is designed to make daily life more affordable for everyone. The reform will see common food items like butter, cheese, confectionery, and savory snacks taxed at 5%, while personal care items such as soaps, toothpaste, and shampoo, previously taxed at 18%, will now be taxed at the same lower rate.
Companies are absorbing some of the tax difference themselves to initiate this consumer-friendly change. Larger product packs with the reduced prices are starting to reach stores before the official GST reform week begins. This move is expected to potentially increase households' disposable income due to essential items moving to the lowest tax bracket.
Amazon Now has launched a campaign promoting up to Rs. 25,000 annual savings for shoppers, while Swiggy Instamart announced it was 'unlocking GST savings early.' Major companies in the Fast-Moving Consumer Goods (FMCG) sector, such as Procter & Gamble (P&G) and Hindustan Unilever Ltd (HUL), have started reducing product prices.
P&G has reduced prices for a variety of products, including Head & Shoulders and Pantene shampoos, Pampers diapers, Gillette, Old Spice, Vicks products, Dove and Clinic shampoos, Lux and Lifebuoy soaps, Bru coffee, and Kissan jam. These early moves by companies and online platforms are a strategy to gain a first-mover advantage ahead of the GST 2.0 reform.
The government has categorized goods into three main tax slabs: 5%, 18%, and 40%. Companies are betting on these lower prices to boost consumption after a tough period of inflation. Some companies have started displaying products with lower prices at retail stores.
General goods become more cost-effective when purchased in countries or regions with lower taxes, lower production or import costs, or less inflation pressure. For instance, goods like chocolate are cheaper in Germany due to a reduced VAT rate compared to France, and some basic goods may be cheaper where inflation or energy costs are lower.
These price reductions are a welcome move for consumers, as they prepare for the upcoming GST 2.0 reform and enjoy the benefits of lower prices on a range of essential and non-essential items.
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