GST next-gen reforms not a response to US tariffs: Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman clarified that the recently announced GST 2.0 reforms are the result of 1.5 years of deliberation, and not a reaction to the ongoing tariff war.

Addressing the media, she said that monitoring of 54 daily-use items has been underway since September 22 to ensure that the benefits of rate reductions are passed on to consumers. “There is not one item where the benefits have not been passed on,” she said, adding that only a few high-end products such as cement and other goods continue to face a marginal 1-2% disparity due to input-output adjustments.

On the revenue front, the Finance Minister said the Centre views revenue loss as a “revenue impact,” which will be offset by higher consumption through the extended festive season that runs until mid-January. “GST revenue going up is good for both the Centre and the states,” she noted.

The GST rate changes have had visible effects across sectors. In consumer electronics, rates on televisions, air-conditioners, and washing machines were reduced from 28% to 18%, driving 20-25% growth for retailers such as Reliance Retail and over 20% for Vijay Sales. LG, Haier, and Godrej Appliances reported double-digit growth, with Haier’s sales surging 85%.

In the automobile sector, rates on two-wheelers, small cars, and three-wheelers were lowered from 28% to 18%, boosting festive-season demand. Maruti Suzuki’s Navratri sales doubled, while Mahindra & Mahindra, Hyundai, Tata Motors, and Hero MotoCorp reported strong sales momentum. Exports of two-wheelers and passenger vehicles touched record highs in Q2 of FY2025-26.

In pharmaceuticals and medical devices, GST cuts from 12% to 5% or nil have reduced medicine prices, improved affordability for chronic-care patients, and lowered production costs for pharma manufacturers.

Sitharaman emphasised that the current surge is not merely pent-up demand, stating that the “consumer story will continue.”

On the macroeconomic front, Minister for Electronics and Information Technology Ashwini Vaishnaw noted that of India’s Rs 335 lakh crore GDP last year, Rs 202 lakh crore came from consumption and Rs 98 lakh crore from investment. The impact of GST reforms, he said, is already visible, with consumption rising nearly 10% this year, an additional Rs 20 lakh crore in consumer spending. This increase is expected to drive a corresponding rise in investments, reinforcing growth momentum and highlighting how the GST reforms have strengthened the link between consumption and investment in the economy.