Middle class to save Rs 45,000 annually from GST cuts, to boost festive season
The middle class might to save up to Rs 45,000 annually as the GST Council slashes rates on essentials, healthcare, and consumer durables. The two-slab structure aims to boost festive demand, leaving families with more disposable income.
- Sep 4, 2025,
- Updated Sep 4, 2025 5:21 PM IST
In a major boost to household budgets ahead of Navratri and Diwali, the GST Council led by Finance Minister Nirmala Sitharaman has approved a sweeping overhaul of India’s indirect tax regime. From September 22, only two slabs will remain—5% and 18%—down from the earlier four. Essentials like food, education, healthcare, and consumer durables such as TVs and refrigerators will now attract lower rates, while ultra-luxury goods and sin products move to a higher 40% bracket.
The reform is designed to put more disposable income in the hands of India’s middle class, widely regarded as the backbone of the consumption economy. The timing is strategic: the festive season traditionally sees a surge in household spending, and the cuts are expected to drive bulk buying while cushioning the impact of global tariff pressures.
Boost for households
For a typical middle-class household earning around Rs 12 lakh annually, everyday expenses — food, education, health insurance, and durables—amount to about Rs 6 lakh a year. Archit Gupta, Founder & CEO of ClearTax, said the GST cuts will trim these costs by nearly Rs 45,000 annually. “When combined with this year’s income tax relief, which exempted income up to Rs 12 lakh, families could save more than Rs 1.25 lakh in total,” Gupta explained. “That’s effectively an unspoken salary hike of over 10%. The savings won’t just fuel festive purchases but are also likely to flow into capital markets, which already saw a 27% growth in FY25.”
Relief on essentials and healthcare
The GST overhaul has slashed rates on a wide range of goods closely tied to middle-class consumption. Small cars, LED TVs, air conditioners, cinema tickets, chocolates, and stationery items now fall under the 18% slab. Daily-use products such as soaps, shampoos, toothpaste, candles, toys, and shaving kits will be taxed at just 5%, down from 12–18% earlier.Healthcare—one of the most significant household expenses—also received a major push. Life and health insurance premiums are now fully exempt from GST, while 33 life-saving drugs, including cancer and rare disease treatments, have been made tax-free. Diagnostic kits, thermometers, and commonly used medicines will carry only a 5% levy.
Push to Aam Aadmi
While addressing the media, Sitharaman underlined that the reforms were aimed squarely at easing the burden on ordinary citizens.
“These reforms have been carried out with the common man in mind,” she said. “Every tax on daily-use items has been reviewed, and in most cases, the rates have been cut sharply. Labour-intensive sectors have been supported, while farmers, agriculture, and the health sector will also benefit.”
Industry hails GST 2.0
Industry leaders welcomed the reset as a turning point in India’s tax system. C S Setty, Chairman of IBA and SBI, called it a “landmark moment.”
“By moving to a simplified two-tier GST structure of 5% and 18%, with 40% on sin goods, India has created a clutter-free, next-generation GST that is simpler, more transparent, and citizen-centric,” Setty said.
He pointed out that goods earlier taxed at 12% or 18% moving into the 5% slab will deliver tangible relief, boosting household incomes and demand. “This additional spending power will fuel credit expansion and overall growth,” he added. The reforms, he said, would also soften inflation as mass consumption goods get cheaper, while businesses benefit from lower compliance costs. Although the government may face short-term revenue dips, stronger consumption and economic activity are expected to offset them.
Industry reactions
Consumer electronics players also welcomed the move. “We see these GST reforms as a decisive step towards fostering growth in appliances and electronics,” said Ravi Agarwal, Co-Founder and MD of Cellecor India. “The rationalisation to a uniform 18% on TVs, ACs, and dishwashers enhances affordability for households while simplifying compliance for manufacturers.”
Economists agree the timing couldn’t be better. With the festive season around the corner, the middle class is likely to loosen its purse strings. The GST cuts are expected to translate into stronger consumer sentiment, higher demand for goods and services, and a much-needed boost for manufacturing. For India’s vast middle-income segment, the changes bring real financial breathing room — just in time for the year’s biggest shopping season.
In a major boost to household budgets ahead of Navratri and Diwali, the GST Council led by Finance Minister Nirmala Sitharaman has approved a sweeping overhaul of India’s indirect tax regime. From September 22, only two slabs will remain—5% and 18%—down from the earlier four. Essentials like food, education, healthcare, and consumer durables such as TVs and refrigerators will now attract lower rates, while ultra-luxury goods and sin products move to a higher 40% bracket.
The reform is designed to put more disposable income in the hands of India’s middle class, widely regarded as the backbone of the consumption economy. The timing is strategic: the festive season traditionally sees a surge in household spending, and the cuts are expected to drive bulk buying while cushioning the impact of global tariff pressures.
Boost for households
For a typical middle-class household earning around Rs 12 lakh annually, everyday expenses — food, education, health insurance, and durables—amount to about Rs 6 lakh a year. Archit Gupta, Founder & CEO of ClearTax, said the GST cuts will trim these costs by nearly Rs 45,000 annually. “When combined with this year’s income tax relief, which exempted income up to Rs 12 lakh, families could save more than Rs 1.25 lakh in total,” Gupta explained. “That’s effectively an unspoken salary hike of over 10%. The savings won’t just fuel festive purchases but are also likely to flow into capital markets, which already saw a 27% growth in FY25.”
Relief on essentials and healthcare
The GST overhaul has slashed rates on a wide range of goods closely tied to middle-class consumption. Small cars, LED TVs, air conditioners, cinema tickets, chocolates, and stationery items now fall under the 18% slab. Daily-use products such as soaps, shampoos, toothpaste, candles, toys, and shaving kits will be taxed at just 5%, down from 12–18% earlier.Healthcare—one of the most significant household expenses—also received a major push. Life and health insurance premiums are now fully exempt from GST, while 33 life-saving drugs, including cancer and rare disease treatments, have been made tax-free. Diagnostic kits, thermometers, and commonly used medicines will carry only a 5% levy.
Push to Aam Aadmi
While addressing the media, Sitharaman underlined that the reforms were aimed squarely at easing the burden on ordinary citizens.
“These reforms have been carried out with the common man in mind,” she said. “Every tax on daily-use items has been reviewed, and in most cases, the rates have been cut sharply. Labour-intensive sectors have been supported, while farmers, agriculture, and the health sector will also benefit.”
Industry hails GST 2.0
Industry leaders welcomed the reset as a turning point in India’s tax system. C S Setty, Chairman of IBA and SBI, called it a “landmark moment.”
“By moving to a simplified two-tier GST structure of 5% and 18%, with 40% on sin goods, India has created a clutter-free, next-generation GST that is simpler, more transparent, and citizen-centric,” Setty said.
He pointed out that goods earlier taxed at 12% or 18% moving into the 5% slab will deliver tangible relief, boosting household incomes and demand. “This additional spending power will fuel credit expansion and overall growth,” he added. The reforms, he said, would also soften inflation as mass consumption goods get cheaper, while businesses benefit from lower compliance costs. Although the government may face short-term revenue dips, stronger consumption and economic activity are expected to offset them.
Industry reactions
Consumer electronics players also welcomed the move. “We see these GST reforms as a decisive step towards fostering growth in appliances and electronics,” said Ravi Agarwal, Co-Founder and MD of Cellecor India. “The rationalisation to a uniform 18% on TVs, ACs, and dishwashers enhances affordability for households while simplifying compliance for manufacturers.”
Economists agree the timing couldn’t be better. With the festive season around the corner, the middle class is likely to loosen its purse strings. The GST cuts are expected to translate into stronger consumer sentiment, higher demand for goods and services, and a much-needed boost for manufacturing. For India’s vast middle-income segment, the changes bring real financial breathing room — just in time for the year’s biggest shopping season.