Industry leaders hail rationalised tax structure as a festive season catalyst for demand, affordability, and growth
The Union government’s sweeping rationalisation of Goods and Services Tax (GST) slabs into a simpler two-tier system of 5 per cent and 18 per cent is being widely hailed as one of the most transformative reforms since GST’s rollout in 2017. With daily essentials, packaged foods, dairy products, beverages, and personal care goods moving into lower tax brackets, the changes are expected to lift household affordability, strengthen rural demand, and drive new momentum across India’s fast-moving consumer goods (FMCG) and food industries.
Among the most impactful shifts is the steep reduction in GST on staples such as coffee, tea premixes, personal care essentials, and dairy products. The rate cut on UHT milk and paneer to NIL, and the reduction on ghee, butter and cheese from 12 per cent to 5 per cent, are expected to boost demand, formalise the dairy ecosystem, and support farmer incomes. Similarly, GST on premix tea, instant teas and ice teas has been reduced from 18 per cent to 5 per cent, and personal care items such as soaps, shampoos and hair oils are now taxed at just 5 per cent instead of 18 per cent.
Industry leaders say these cuts arrive at the right moment, ahead of the festive season, when consumer sentiment peaks and households typically increase spending.
Leaders Applaud Bold, Structural Reform
Sanjiv Puri, Chairman & Managing Director, ITC commented, “I would like to compliment the Hon’ble Finance Minister for ushering in a transformative, bold and comprehensive Next Generation GST architecture. The holistic reforms will indeed go a long way in ensuring simplicity and transparency, enhancing trust, ease of living and ease of doing business while driving formalisation of the economy. The GST rate rationalization across various sectors will bring relief to consumers through enhanced affordability and will, in addition to spurring consumption, drive investment and growth in the economy, leading to employment generation. The Next Gen structural reforms will undoubtedly benefit MSMEs and farmers who form the backbone of the economy. I am sure the progressive reforms announced by the Government will power many more opportunities in the economy and lead to enhanced investments over time.”
Tea Sector Welcomes Affordability Push
Sanjay Singal, CEO, Wagh Bakri Tea Group said, “The reduction in GST rates on daily essentials and a host of other products is a far-reaching reform that will strengthen domestic consumption and provide a sustained boost to the FMCG sector. Making everyday products more affordable will not only enhance purchasing power but also encourage consumers to shift from unbranded to branded goods. The GST on the premix tea range, including instant teas and ice teas, has been revised from 18 per cent to 5 per cent, making them more affordable. Over time, we expect to see higher volume growth, and stronger momentum in overall consumption-led growth. We are thankful to Finance Minister N Sitharaman for the GST reductions.”
Personal Care and FMCG Players See Stronger Consumption Ahead
Sunil Agarwal, Co-founder and Chairman of Joy Personal Care (RSH Global)
“The government’s decision to reduce GST on daily essentials from 18 per cent to 5 per cent is a commendable step that will directly benefit consumers and energize the FMCG industry at large. For households, this tax relief eases financial pressure and makes everyday essentials more affordable, while also encouraging higher consumption. Rural India has been driving FMCG growth for six consecutive quarters, and this move will further strengthen demand in these price-sensitive markets, even as urban consumption continues to recover.
With the festive season ahead, this will lift sentiment and put more disposable income in the hands of millions of Indian families. More than just a tax reduction, it signals confidence in India’s consumption story and provides the FMCG industry with a much-needed boost. The sector has already recorded 13.9 per cent value growth, supported by rural demand, urban revival, and the rapid rise of e-commerce, particularly in southern metros. Small manufacturers have also benefitted from easing inflation, and this tax cut will further reinforce that trend. These measures will drive demand across categories, including beauty and personal care and our priority is to ensure these benefits are passed on to consumers and to continue strengthening our connection with households across India.”
Tarun Arora, CEO & Wholetime Director, Zydus Wellness said, “The government’s recent GST reforms come at a pivotal moment for the FMCG industry, especially as we move into the festive season. The sector’s resilience is tied to consumer sentiment, and these measures provide the catalytic boost needed to sustain that resilience. It also lays the foundation for sustained consumer confidence by directly addressing inflationary pressures, making daily essentials more affordable, and increasing household disposable income.
Urban consumers, who represent 30 per cent of the population but account for nearly 70 per cent of packaged goods consumption, will particularly feel this positive impact. Yet the broader impact lies in how this policy could reshape demand patterns over the next 12–18 months. The industry can expect three shifts: greater rural penetration as affordability improves, faster adoption of digital-first consumption models, and an acceleration of wellness-focused choices as families prioritize nutrition, preventive health, and self-care. For MSMEs and regional businesses, a more rationalized tax structure provides fertile ground to scale and innovate, further democratizing growth. Importantly, this simplification of the tax structure also enhances the ease of doing business, benefiting both domestic enterprises and international entities looking to expand in India.”
Personal Care Essentials Made Affordable
According to Ankit Agrawal, Director, Mysore Deep Perfumery House (MDPH), “We welcome the government’s decision to reduce GST on personal care essentials from 18 per cent to 5 per cent, a move that will provide direct relief to consumers and boost demand in rural and semi-urban markets. We have already seen the positive impact of GST rationalization in the past, when agarbatti was brought down to 5 per cent. It strengthened affordability, improved consumption, and supported livelihood generation for thousands of women engaged in agarbatti making. The current reform will similarly stimulate growth in daily-use categories like soaps, shampoos, and hair oils, while giving an additional push to festive season sales. At MDPH with our flagship brand Zed Black Incense sticks, we will pass on the benefits to consumers through special discounts, bigger value packs, and monthly combos to ensure maximum affordability. This is a progressive step that balances consumer interest with industry growth, ensuring essentials remain accessible to all while driving the FMCG sector forward.”
Dairy Sector Expects Demand Boost and Farmer Gains
Devendra Shah, Chairman, Parag Milk Foods commented, “The reduction in GST rates on UHT Milk and Paneer to NIL and dairy products like ghee, butter, cheese from 12 per cent to 5 per cent marks a significant development for the food and FMCG sectors. This move is expected to make these commonly consumed items more affordable, benefiting end consumers, particularly in price-sensitive rural and semi-urban areas. Furthermore, this will also benefit the farmers who are the backbone of this industry. Higher demand will allow farmers a better income stability and the confidence to invest in better cattle care and feed. Over time, this can uplift rural livelihoods, strengthen the economy, and ensure that the growth of the organised dairy sector directly translates into a better quality of life for India’s dairy farming families.
The lower tax burden could help increase consumption of branded and quality-assured dairy products, potentially encouraging a shift away from unregulated or adulterated alternatives. This rate cut will boost demand across formal dairy channels, offering scope for improved supply chain efficiencies. This GST revision is broadly seen as a step toward making essential nutrition more accessible and promoting formalization in India’s vast dairy ecosystem.”
Retailers See Stronger Momentum
As per Manish Bajoria, Chief Financial Officer, bigbasket, “This festive gift of GST rationalization is a welcome step toward making daily essentials more affordable. It will also empower our farmer partners by strengthening the agricultural supply chain and improving cost efficiencies. We believe this will encourage greater consumption and contribute to building a stronger, more resilient India. We are fully prepared to work with our partners and authorities to manage this transition and pass on the benefits to customers.”
