Modi’s Diwali Gift: New GST Rates Slash Prices on Electronics, FMCG & More

Why Is the Government Revamping GST Now?

The government currently earns 65% of GST revenue from the 18% slab. The higher 28% slab contributes just 11%. By merging slabs, the Centre hopes to:

• Simplify compliance for businesses, especially MSMEs.
  
  

• Boost consumption by lowering prices of daily-use goods.
  
  

• Reduce tax disputes caused by confusion between 12% and 18% rates.
  
  

• Project a consumer-friendly reform ahead of a festive season.
  
  

Revenue Contribution by Current Slabs

Key insight: The government is betting that increased consumption and a larger tax base will offset potential revenue losses from lower rates.

What Did PM Modi Say?

During his Independence Day address, Modi pitched the reform as a gift for every citizen:

“This Diwali, I am going to make it a double Diwali for you. Citizens will receive a big gift… We are bringing next-generation GST reforms. This will reduce the tax burden across the country.”

He also linked the reform to Atmanirbharta (self-reliance), suggesting that lower costs on essentials and electronics could support both consumers and domestic manufacturers.

The Bigger Picture: GST 2.0 and Policy Implications

While the festive cheer is obvious, experts caution that the move has deeper consequences:

1. For Households

• Direct savings on appliances, personal care, and daily essentials.
  
  

• Increased purchasing power during festive season sales.
  
  

2. For Businesses & MSMEs

• Simpler rate structure = easier compliance and fewer disputes.
  
  

• Lower rates on electronics and cement may stimulate demand.
  
  

• FMCG companies could pass on cost savings to consumers or improve margins.
  
  

3. For State Governments

• States rely heavily on GST revenue. Lower rates might reduce collections in the short term.
  
  

• Compensation from the Centre may become a sticking point in the GST Council.
  
  

4. For Inflation & Economy

• Cheaper essentials can soften consumer inflation in the near term.
  
  

• Boost in demand for housing and appliances may push industrial growth.
  
  

• But risk remains: if revenues drop, fiscal pressures could rise.
  
  

Risks & Challenges Ahead

While the reforms are consumer-friendly, challenges remain:

• Revenue Impact: Will higher consumption make up for the shortfall from lower GST rates?
  
  

• Luxury Tax Pushback: A 40% tax on “sin goods” and online gaming could face industry lobbying.
  
  

• State-Centre Dynamics: States may argue that revenue loss threatens their welfare spending.
  
  

• Implementation Hiccups: Businesses will need time to update billing software, pricing, and compliance systems.
  
  

Expert view: Economists suggest that if implemented smoothly, the simplified structure could boost India’s Ease of Doing Business ranking and attract investors. But execution will be key.

Consumer Guide: How Much Can You Save?

Let’s look at sample savings under the new GST rates:

Takeaway: For households upgrading appliances or renovating homes, the timing is ideal. For FMCG products, the savings may feel small individually but add up across monthly purchases.

Looking Ahead: Will GST 2.0 Deliver?

The government has framed this as a simplification and consumer relief measure, but the long-term success will depend on:

• Whether businesses actually pass on benefits to consumers.
  
  

• How states adjust to potential revenue dips.
  
  

• If compliance really becomes smoother for small businesses.
  
  

Forward-looking insight: If the reform spurs consumption while keeping inflation in check, it could become a political and economic win. But if states struggle with revenue shortfalls, tensions in the GST Council may resurface.

Key Takeaways

• GST simplified to 5% & 18% slabs — replacing 12% & 28%.
  
  

• Everyday items like soaps, snacks, mobiles move to 5%.
  
  

• Big-ticket items like ACs, cement, TVs drop to 18%.
  
  

• Luxury & sin goods taxed at 40%.
  
  

• Households benefit this Diwali with real price cuts.
  
  

• States may lose short-term revenue, raising fiscal concerns.
  
  

• Economists see this as a balancing act between simplification, affordability, and revenue stability.
  
  

Final Word

This Diwali represents more than just lights and sweets; for Indian consumers, it represents lighter bills.  The new GST rates have put smiles on everybody's faces, from toothpaste to air-conditioners, as it will help lower household budgets and stimulate demand for the festive occasion.

However, behind the shopping euphoria is more than just Diwali lights — it is a policy experiment.  Will India keep its tax revenue while simplifying and being user-friendly?  If successful, GST 2 will be able to finally deliver on its promises as a Good and Simple Tax.