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Tag: GST Council

  • EY Hikes India’s GDP Growth Forecast to 6.7%, Urges Diversification of Export Markets

    Based on robust growth in the June quarter and the implementation of GST reforms, EY increased India’s real gross domestic product (GDP) forecast for the fiscal year 2025–2026 (FY26) from 6.5% to 6.7%.

    EY stated in its ‘Economy Watch’ report for September 2025 that, despite global headwinds affecting India’s export prospects for both goods and services, and with 1QFY26 real GDP growth of 7.8% and demand stimulation through GST reforms on the one hand, we expect India to still show an annual real GDP growth of 6.7% in FY26.

    GDP Growth Outperformed RBI’s Expectations

    The June quarter’s GDP growth of 7.8% exceeded the Reserve Bank of India’s (RBI) forecast of 6.5% growth during the monetary policy meeting in August. EY claims that the continuous supply chain interruptions and tariff-related concerns give India a chance to re-evaluate the structure and makeup of its global commerce, particularly with the US and China.

    India has a “narrow” base of import sources and export destinations, the research continued. India is heavily reliant on the United States and, to a lesser degree, on China, according to DK Srivastava, chief policy advisor at EY India. Diversifying its import and export markets should help India find additional chances among the BRICS nations and lessen its dependency on China and the US.

    How new GST 2.0 Roll Out Further Boosted GDP Growth

    With the introduction of GST 2.0 earlier this month, rates were rationalised to be 5% and 18%, with a special rate of 40%. Automobiles, health, and textiles are just a few of the industries that stand to gain from this. According to Srivastava, some product categories will see considerable fee reductions under the new tariff system.

    Textiles, consumer electronics, vehicles, health, and the majority of food items are among the major beneficiary sectors. Lower prices may have wide-ranging benefits in these employment-intensive industries. He went on to say that fertilisers, agricultural equipment, and renewable energy are other industries that could gain from the production side.

    Farmers may profit from reduced input costs in several industries. First, a short-term impact on revenue is anticipated. EY anticipates that demand will rise in response to a significant drop in post-tax pricing, perhaps making up the revenue losses in the long run.

    Quick
    Shots

    •EY raises India’s FY26 GDP growth
    forecast to 6.7%, up from 6.5%, driven by strong Q1 performance and GST
    reforms.

    •India’s GDP grew 7.8% in the June quarter,
    surpassing the RBI’s 6.5% projection.

    •Supply chain disruptions and tariffs
    prompt calls to diversify export and import markets beyond the US and China.

    •EY suggests exploring BRICS nations
    and emerging economies to reduce trade dependency.

    •New GST structure with 5%, 18%, and
    40% slabs expected to lower prices and stimulate demand.

    •Textiles, automobiles, healthcare,
    consumer electronics, food, fertilisers, and renewable energy among key
    beneficiaries.

  • RBI MPC Expected to Hold Rates Steady in October Policy Review

    According to a report released on 25 September, the Reserve Bank of India’s monetary policy committee (MPC) is expected to keep the repo rate at its current level in its October review, taking into account the favourable effects of the GST reforms on demand, the stronger-than-expected Q1 FY26 GDP growth, and an inflation trajectory that is predicted to slope upwards after that.

    Because of the rationalisation of the GST, the inflation trajectory remained lower (the average for FY2026 is currently 2.6%). According to ICRA’s analysis, the transmission of the previous 100 bps rate drop is considered to be muted for outstanding deposits (-18 bps) but practically complete for fresh deposits (-94 bps).

    What Report Further Stated?

    The weighted average lending rate also decreased by 60 basis points for new loans, while it eased by 42 basis points for existing loans. It is believed that there won’t be any more notable transmission to loan rates in the upcoming months.

    The analysis predicts that the yield curve will continue to be steep and that the 10-year G-sec yield for the government bond market will trade between 6.40 and 6.60%. This is because long-term yields stay sticky due to demand-supply dynamics and fiscal concerns, while short-term rates are kept stable by easy liquidity.

    According to the paper, after a US Fed rate drop, the gap between the 10Y India G-sec and the 10Y US Treasury yield widened considerably, from 209 bps at the end of June 2025 to 236 bps in September 2025. Due to advance tax outflows, the systemic liquidity surplus declined in September 2025 after being significant in June and August of that year.

    Good News Ahead of Festive Season

    The report added that G-sec redemptions (INR 1.0 trillion) in early November 2025 and a 75 bps CRR drop that is still due during October–November 2025 are anticipated to improve liquidity and counteract the strain of currency leakage during the festive season. Variable Rate Repos (VRRs) may be maintained by the RBI to control sporadic tightness.

    In comparison to previous projections, the research projects that GST rationalisation will reduce headline CPI inflation by 25–50 basis points between Q3 FY2026 and Q2 FY2027. “Average CPI inflation for FY2026 is now projected at around 2.6% (against 3.0% earlier),” said the report.

    Quick
    Shots

    •GST reforms boost demand while
    keeping inflation lower; FY26 average CPI now seen at 2.6% vs. 3.0% earlier.

    •Muted transmission of the previous
    100 bps rate cut: new deposit rates fell 94 bps, lending rates down 60 bps.

    •10-year G-sec yield expected to stay
    between 6.40%–6.60%, with a steep yield curve persisting.

    •India–US bond yield gap widens to 236
    bps post Fed rate cut.

    •Liquidity to improve in November with
    INR 1 trillion G-sec redemptions and a 75 bps CRR cut expected.

  • Amul Slashes Prices on 700 Dairy Products Following GST Rate Cut

    Amul has lowered the cost of almost 700 product packs, which include ice cream, cheese, butter, ghee, and frozen snacks. The revised prices will take effect on September 22, 2025. The price change comes after the GST rates were recently lowered. The change was made in response to Gujarat Co-operative Milk Marketing Federation Limited’s (GCMMF) decision to fully pass on the advantages of the most recent GST rate reduction to consumers. GCMMF sells dairy products under the Amul brand.

    With effect from September 22, there have been significant price reductions for over 700 product packs, including those for butter, ghee, cheese, paneer, chocolates, baked goods, and frozen snacks. Amul Butter (100 g) used to cost INR 62, but now it only costs INR 58. The 500g bag used to cost INR 305, but now it costs INR 285.

    The price of ghee has been drastically reduced; the 1-litre carton is now INR 40 less than it was before, at INR 610, and the 5-litre tin is now INR 200 less, at INR 3,075. With Amul Gold (1L UHT) going from INR 83 to INR 80 and Amul Taaza Toned Milk (1L UHT) going from INR 77 to INR 75, milk has also been more reasonably priced.

    Drop in Prices of Frozen Items, Ice Cream, and Chocolates

    Cuts have also been made to processed and frozen foods. The price of 200g of frozen paneer has decreased from INR 99 to INR 95, and the price of a 1kg block of processed cheese has decreased by INR 30 to INR 545. Smaller packages, such as 200g of cheese cubes and 200g of chopped cheese blend, cost INR 9 and INR 14, respectively. Some of the biggest cuts have been made to the ice cream line.

    While the well-liked Kulfi Punjabi (60 ml) now only costs INR 10 instead of INR 15, the price of Tub Vanilla Magic (1 L) has decreased from INR 195 to INR 135 (a savings of INR 60). Even small cup portions, such as Strawberry Cup (55 ml), are now available for INR 10 instead of INR 20, while premium flavours, like Duetz Gold Mango (60 ml), have been lowered by INR 25.

    The price of the 150g Amul Dark Chocolate has dropped from INR 200 to INR 180, and the price of the 250g Chocominis tub has decreased from INR 40 to INR 400. A 450g container of sugar-free cookies is now available for INR 225 instead of INR 250, and bakery goods like Amul Butter Cookies (200g) have decreased by INR 10 to INR 65.

    Especial Items also Witnessed Price Deductions

    Speciality products, like Amul Mithai Mate (400g tin), are also less expensive; they now cost INR 120 after an INR 10 discount. Amul French Fries (1.25kg) are now available at INR 365 instead of INR 405. “GCMMF said in a statement that Amul thinks the price cut will increase consumption of a variety of dairy products, especially ice cream, cheese, and butter, as the per capita consumption is still very low in India, creating a large growth opportunity.”

    GCMMF, which is owned by 36 lakh farmers, stated that the action is anticipated to increase demand and increase its revenue. Mother Dairy had previously declared price reductions for all of its products beginning on September 22.

    Quick
    Shots

    •Price reductions apply to butter,
    ghee, cheese, paneer, milk, chocolates, bakery items, and frozen snacks.

    •Amul Butter (100g): down from INR 62
    to INR 58; 500g pack reduced from INR 305 to INR 285.

    •Ghee: 1L carton reduced by INR 40 to
    INR 610; 5L tin down by INR 200 to INR 3,075.

    •Milk: Amul Gold 1L UHT now INR 80
    (earlier INR 83); Amul Taaza 1L UHT now INR 75 (earlier INR 77).

  • Consumers to Get Full Benefit of GST Rate Cuts as ITC Updates FMCG Prices

    After the central government-led GST council decided to revamp the economy’s current tax structure, the fast-moving consumer goods (FMCG) giant ITC Ltd announced on September 18, 2025, that it has decided to pass on the full benefit to its customers across the firm’s portfolio.

    ITC Bringing Required Relief to Consumers

    ITC executive director B. Sumant stated that the changes have been revolutionary for businesses and consumers alike, facilitating compliance and fostering expansion. He went on to say that the rationalisation of the GST rate in a number of sectors will undoubtedly benefit consumers by increasing affordability, stimulating consumption, and bolstering investments, growth, and jobs.

    The full advantages of the GST rationalisation will be transferred to all relevant products at ITC. According to the corporation, its FMCG companies reach about 7 million retail locations throughout India and cover a broad range of categories and goods. In contrast to its previous multi-slab structure, the national government’s GST Council suggested that India have two GST tax slabs, one at 5% and another at 18%, during its 56th meeting on September 3, 2025. On September 22, 2025, the revised GST structure is scheduled to go into force.

    Like ITC, Maruti SuZuki Also Announced Price Cuts

    As a result of the GST council’s rate rationalisation decision, automakers such as Maruti Suzuki announced their own price reductions. The sub-four-metre car market, which makes up a major amount of the company’s portfolio, is currently being capitalised on by India’s largest automaker.

    Maruti Suzuki passenger cars will be up to INR 1.29 lakh less expensive starting on September 22, 2025, the day the revised GST structure goes into effect, according to earlier reports from a number of media outlets.

    Following the GST rate reductions in the Indian economy, additional automakers, including Mahindra & Mahindra, Tata Motors, TVS Motor Co., Yamaha, Honda Automobiles, and Hero MotoCorp., have announced price reductions on the ex-showroom prices of their vehicles.

    It is anticipated that these price cuts will increase consumer spending and maybe increase demand for these commonplace items. Additionally, the action shows that the FMCG industry is committed to transferring the advantages of tax cuts to final customers.

    Customers are anticipated to embrace the price cuts for these well-known FMCG brands, which could result in higher sales volume in the upcoming months. These price reductions may further encourage consumer spending in the FMCG industry as the festive season draws near.

    Quick
    Shots

    •Consumers to get direct price relief
    on ITC products from September 22, 2025.

    •ITC FMCG products available in 7
    million retail outlets nationwide.

    •Maruti Suzuki, Mahindra, Tata Motors,
    TVS, Yamaha, Honda, Hero MotoCorp also announce price cuts.

    •Maruti Suzuki cars up to INR 1.29
    lakh cheaper post-GST rate cut.

  • FMCG Companies Tell Tax Authorities they can’t Cut MRPs on Low-Value Packs After GST Reduction

    In an effort to lower the cost of everyday necessities for the average person, the Modi administration has redesigned the Goods and Services Tax (GST) system. The GST Council authorised a two-tier rate structure of 5 and 18%, which will go into effect on September 22 as part of this significant change, lowering the tax rates on the majority of necessities.

    The goal of the move was to reduce the price of commonplace goods like toothpaste, soap, and biscuits. According to a report by moneycontrol.com, consumer product producers have informed tax authorities that this will not directly result in a decrease in the cost of common small packs, such as INR 20 toothpaste sachets, INR 10 soap bars, or INR 5 biscuit packets.

    Speaking further on the development, Yashmit Gala, CEO, Galaji Spices stated, “The concern raised by FMCG players about not being able to reduce MRPs on low-value packs after the GST rate cut is very real. In categories like food staples and spices, the pricing of smaller SKUs is often already compressed to the last rupee to remain attractive in rural and value-driven markets. When you factor in packaging, logistics, and retailer margins, there is hardly any room left to adjust MRPs further without eroding viability. Consumers may expect a visible drop in prices, but in practice, it is operationally difficult to rework pack sizes or price points in such a short window. Instead, the benefits of GST reduction are more likely to reflect in supply chain efficiencies, improved trade margins, and promotional offers rather than a direct cut in printed MRPs of small packs.”

    Why Sudden Price Change Can’t be Implemented?

    Indian consumers are very accustomed to these typical price points, according to the media report. Customers may become confused and have their basic purchasing patterns disturbed if the price is lowered to odd figures like INR 9 or INR 18 rather than neat INR 10 or INR 20. Typically, packs of INR 5, 10, or 20 are impulsive purchases that are frequently made without much consideration.

    Unexpected price changes may cause confusion or reduce sales. By expanding the number of products in the pack while maintaining the same price, businesses are passing on the GST benefit rather than lowering prices. For instance, extra biscuits may now be included in a pack of biscuits priced at INR 20.

    What This Means for Consumers’ Daily Purchases?

    Practically speaking, consumers won’t notice significant drops in the sticker price of minor necessities. Instead, consumers will discover that some extra biscuits, soap, or toothpaste are now included in the same INR 5, 10, or 20 packets.

    This plan maintains known pricing practices while guaranteeing that customers profit from the tax savings. Given customer behaviour patterns and the logistical difficulties associated with shifting price points for mass-market goods, industry analysts think this strategy makes sense.

    A larger initiative to streamline India’s indirect tax structure and lower consumer costs included the reduction of GST rates and the removal of several tax bands. The increase in product supply at the same price point helps consumers obtain better value for their money, even though the benefit might not be immediately apparent in reduced MRPs.

    Quick
    Shots

    •Everyday items like toothpaste, soap, and biscuits
    expected to become cheaper.

    •Companies told tax authorities that MRPs on
    low-value packs (INR 5, 10, 20) cannot be reduced.

    •Price points like INR 5/10/20 are deeply ingrained
    in buying behavior; odd pricing may confuse consumers and hurt sales.

    •Instead of lowering MRPs, firms are increasing
    product quantity (e.g., more biscuits in the same INR 20 pack).

    •No major change in sticker prices; consumers get
    better value for money at the same familiar price points.

    •Maintaining price points is strategic for
    mass-market sales and avoids disruption of impulse buying patterns.

  • NPPA Orders Drug Makers to Cut Medicine Prices After GST Reduction

    On 12 September, the National Pharmaceutical Pricing Authority (NPPA) ordered all producers of pharmaceuticals and medical devices to lower their goods’ maximum retail prices (MRPs) right away.

    The government’s decision to rationalise the goods and services tax (GST) rates on medications and formulations, which was recommended at the 56th meeting of the GST Council, prompted this action. The goal of the NPPA’s move, which goes into effect on September 22, is to guarantee that the public directly benefits from the GST cut.

    On September 12, the NPPA issued a formal memorandum outlining precise guidelines for the pharmaceutical sector. It stated that in order to comply with the new GST rates, all manufacturers and marketing firms must update the maximum retail price of their medications and medical equipment.

    Till Now, No Penalties for Non-Compliance

    Although the NPPA statement does not outline sanctions for non-compliance, it does have the power to keep an eye on medication and medical device costs and to take corrective action if necessary. Under the Essential Commodities Act of 1955, failure to comply with NPPA’s price notifications may result in prosecution, which carries penalties such as fines and jail.

    Manufacturers must provide dealers, merchants, state drug controllers, and the government with an updated or supplemental price list to guarantee a seamless implementation. The public finds the NPPA’s directive to be extremely important, according to a number of media sources.

    The authority is making sure that the drop in the GST rate results in lower pricing for customers by requiring the modification of MRPs, which will make necessary medications and medical equipment more accessible and reasonably priced. Patients nationwide will profit from this judgement because it has a direct effect on their out-of-pocket medical costs.

    Raising Awareness: How the Public will be Informed

    In order to guarantee that the public is informed of these developments, the regulator has also underlined the necessity of extensive communication. Manufacturers and marketing firms are directed to notify dealers, retailers, and customers about the lower GST rates and the associated updated MRPs using all available means, such as print, electronic, and social media.

    To guarantee compliance, industry associations have also been requested to place ads in both national and local media. For the stakeholders in the pharmaceutical business as well as the government, the choice is very important. By using fiscal policy to lessen the financial burden of healthcare on citizens, the government shows its dedication to consumer welfare and health fairness.

    The NPPA has given the industry advice on how to handle the changeover. The memo makes it clear that if businesses can guarantee price compliance at the retail level, they are not required to return or re-label existing product that was released prior to September 22.

    Quick
    Shots

    •New pricing to apply from September
    22, 2025.

    •Decision taken at the 56th GST
    Council meeting.

    •Manufacturers & marketers must
    update MRPs to reflect new GST rates.

    •No direct penalties announced yet,
    but non-compliance may invite action under Essential Commodities Act
    (fines/jail).

  • Soft Drinks, Energy Drinks Prices Rise as GST Increased to 40%

    The GST Council authorised an increase in taxes on sin and luxury goods on 3 September, establishing a new 40% bracket for commodities including tobacco, pan masala, aerated drinks and luxury cars, despite the announcement of huge GST rate cuts.

    With the government moving to a simpler regime with two primary slabs of 5% and 18% in addition to a special 40% rate, the decision represents a significant reform of the indirect tax system.

    What are Sin Goods?

    Tobacco and sugary drinks are examples of sin goods, also known as demerit goods, which are things deemed hazardous to society or health. These are subject to the highest GST tax rates in an effort to deter consumption and raise more money for social programs.

    Sin items will henceforth be taxed at 40%, in contrast to basic goods that are taxed at 5% or 18%. Business organisations in the healthcare and MSMEs sectors support GST 2.0 as a major push for relief and self-reliance.

    Higher Tax to Reduce Consumption of Sin Goods

    Because sin items, like tobacco and sugary drinks, are deemed detrimental to society or health, a higher GST rate on them is appropriate. The government aims to deter consumption and generate more money for public welfare by making items more expensive. According to the Economic Times, cigarette use alone is thought to cost India more than 1% of its GDP in lost productivity and medical expenses.

    The levy’s twin purpose of reducing consumption and promoting social activities is further supported by the fact that the money collected by taxing them at a higher slab is frequently utilised to assist welfare and health programmes. Furthermore, despite price increases, buyers frequently keep purchasing these goods since demand for them is very inflexible regarding prices. Sin goods are a dependable source of income for the government since this guarantees that tax collections will increase gradually even if consumption does not decline dramatically.

     Only a few specific things are eligible for the special rate, which is primarily applied to luxury and sin goods. Prior to this, the majority of these commodities were subject to both GST and Compensation Cess. In order to preserve the total tax incidence on the majority of items, the Cess rate is currently being combined with GST, as the government has chosen to discontinue the Compensation Cess charge. According to the Central Board of Indirect Taxes and Customs, other goods and services were already subject to the maximum GST rate of 28%; hence, the special rate was applied to them.

    Quick
    Shots

    •GST Council introduces new 40% slab
    on sin and luxury goods from September 3, 2025

    •Products like tobacco and sugary
    drinks, considered harmful to health and society.

    •Objective is to discourage
    consumption while raising funds for public welfare and healthcare programs.

    •Sin goods have price-inelastic
    demand, ensuring steady tax collections despite higher prices.

  • GST Cut to Drive Immediate Growth in FMCG, Auto and Electronics Markets

    As the final tax slabs were revealed on September 4, consumption stocks, which had already surged since Prime Minister Narendra Modi announced a reduction in the goods and services tax (GST) in his Independence Day speech on August 15, continued to rise.

    The Nifty FMCG index has increased 4.4% since August 15th, while the Nifty 50 has increased 0.7%. Analysts anticipate that the surge will continue, supported by solid volume growth that may contribute to higher profits. However, the effects won’t only be felt in industries with high levels of consumption. According to experts, the GST drop will have an impact on logistics, banks, non-banking financial corporations (NBFCs), and other sectors that are dependent on consumer demand.

    Puneett Kumar Kanojia, Founder, BollyBites VadaPav (Bollybites Foods Pvt. Ltd.) said, “The GST cut is a positive move that will especially benefit FMCG and food service businesses, including fast-growing categories like QSRs and street-food brands. In India, affordability drives consumption, and even a small reduction in effective prices can lead to higher footfall and repeat purchases. For food startups and quick-service outlets, this will not only ease pricing pressure but also enable us to pass on the benefit directly to customers, thereby strengthening consumer sentiment. Lower tax outflow also improves working capital for small and mid-sized players, allowing more reinvestment in quality, innovation, and expansion. Overall, the GST cut will act as a strong consumption booster, with ripple effects across the supply chain—right from raw material suppliers to the end consumer—ultimately supporting both growth and formalization in the sector.”

    The GST Council streamlined the system on September 3rd, lowering slabs to 5% and 18% while keeping the charge at 40% for luxury and sinful items. Most categories moved to lower rates, while the 12% and 28% brackets were eliminated. Additionally, taxes on a number of necessities and staples were lowered from 18% to 5%.

    Commenting on the development, Hiren Shah, Managing Director, Jyoti Global Plast Ltd. stated, “The GST Council’s reforms consolidating into two slabs of 5% and 18% alongside targeted reliefs for drones and simulators, mark a strategic inflection point for advanced industries. The sharp cut to 5% GST on unmanned aircraft and IGST exemption for simulators directly reduces costs for defence and aviation ecosystems, encouraging wider adoption and domestic manufacturing.”

    “For plastics and packaging, harmonisation under the 18% slab simplifies compliance while lowering cascading effects across supply chains. The quicker registration process and seven-day refund window offer a strong boost to exporters, particularly in specialty chemicals and advanced materials, where working capital cycles are often stretched. Collectively, these reforms support scale, innovation and competitiveness across sectors critical to India’s industrial future, and we are ready to leverage our manufacturing expertise and scale to partner with emerging sectors,” he added.

    How Lower GST Will Boost Auto and Electronics Demand

    Reduced costs won’t encourage households to purchase more soap, oil, or shampoo, according to analysts; thus, the impact on necessities will be minimal. Discretionary items will get a greater boost.

    While the demand for FMCG is comparatively inelastic, additional purchases may be prompted by a cheaper television or automobile. The demand increase would not be substantial for FMCG companies, but customers would choose to purchase well-known brands over less expensive ones because of their superior pricing, which would be advantageous to the listed FMCG companies.

    The budget’s income tax cuts, a robust monsoon that boosted consumption in rural areas, and the recent GST cut all suggest a prosperous holiday season.

    “The government’s decision to retain the 5% GST rate for EVs is a welcome move, as it reinforces its confidence in the industry irrespective of the segment. This continued policy support ensures that EVs remain the most tax-favored category, across both mass-market and premium offerings, allowing them to compete on the basis of technology, performance, and convenience. At the same time, the reduction in GST on ICE two-wheelers under 350cc to 18% is a balanced step that will make mobility more accessible and give the broader auto industry a healthy boost. Together, these reforms signal a positive and inclusive approach to strengthening India’s automobile ecosystem,” said Dinesh Arjun, CEO ,Cofounder, Raptee.HV

    Investor Outlook Ahead of Festive Season

    Investors’ recognition that reduced GST rates directly translate into better demand forecasts across consumption-linked sectors is reflected in the market’s positive reaction. As the holiday season draws near, financial institutions anticipate that “festive demand should see a positive boost” but caution about “some negative demand impact in September”.

    The anticipated increase in consumption can have a multiplier effect on overall economic growth. According to analysts, the key will be how quickly businesses pass the advantages on to customers. If done correctly, this step will boost spending and sentiment.

    The fact that these reforms cover everything from everyday necessities to expensive purchases explains why investors see this as a structural change rather than a short-term stimulus, which supports the widespread market rally in industries as diverse as FMCG, insurance, white goods, cement, and automobiles.

    “GST 2.0 represents one of the largest reforms in taxation since the initial introduction of GST in 2017. Its implications for India’s MSMEs could be revolutionary. For many years, small companies suffered from overly complex tax structures, delays in refunds, and compliance burdens that consumed time and working capital. The new dual slab of 5% and 18% provided clarity on the classification issue and invoicing however; we are working to ameliorate classification issues,” opined Mukesh Pandey, Director of Rupyaa Paisa.

    Adding further, he said, “For MSMEs this could mean less legal battles, higher efficiency and increased buyer demand as several products are now more affordably classified. India’s 6.4 crore MSMEs employing more than 11 crore people are the engine of our economy. If GST 2.0 is implemented effectively, it will not only lower the cost of compliance, but improve competitiveness and have small businesses better positioned to succeed domestically and internationally.”

    Quick Shots

    •Since PM Modi’s
    Independence Day speech (Aug 15), Nifty FMCG up 4.4%, Nifty 50 up 0.7%.

    •Boost expected in
    FMCG, autos, electronics, logistics, banks, and NBFCs.

    •Minimal impact on
    necessities (soap, oil, shampoo); stronger demand for discretionary items
    (cars, TVs, electronics).

    •Lower GST may push
    consumers toward premium FMCG brands over cheaper alternatives.

  • The GST Council May Think Reducing the Tax on Online Meal Delivery Services

    According to reports, at its upcoming meeting on December 21, the Goods and Services Tax (GST) Council will discuss reducing the tax rate on online food deliveries from the current 18% to 5%. According to reports cited by a media outlet, foodtech businesses will not be able to claim the input tax credit (ITC) for delivery fees. According to the report, the Council’s Fitment Committee intends to suggest lowering the GST rates, which would take effect on January 1, 2022. By doing this, the government seems to have heeded the demands of foodtech platforms to lower GST on delivery fees and level the playing field with eateries.

    The Move will Provide Breather to Zomato and Swiggy

    For Zomato and Swiggy, which have been struggling under the weight of numerous GST notices, a decrease in GST rates will bring much-needed respite and clarity. The proposed action is noteworthy since it comes days after Maharashtra’s GST authorities ordered foodtech giant Zomato to pay INR 804 Cr, including taxes and penalties, for failing to pay certain taxes between 2019 and 2022. In addition, earlier this year, the company received several GST demand notices from Gujarati, Karnataka, and Haryana officials. Swiggy, its fiercest competitor, may also owe INR 326.7 Cr in GST, according to its most recent draft red herring prospectus (DRHP), which was submitted to SEBI prior to becoming public. The news follows Zomato’s November inaugural qualified institutional placement (QIP), which garnered INR 8,500 Cr (about $1 billion).

    Recent Developments of Swiggy and Zomato

    In October, Swiggy introduced Bolt, a speedy delivery service that promises to bring meals to consumers in as little as ten minutes. This project, which has begun in a few locations, attempts to satisfy the growing customer demand for meal delivery that is quick, tasty, and convenient.

    Today Customers are purchasing a wide variety of goods, and food delivery is no exception. Customers simply fall for products more quickly. Whatever the food is, it makes no difference. During the September earnings call, Rohit Kapoor, CEO of Swiggy’s Food Marketplace, stated that the business believes Bolt is a major bet here. With a ‘Buy’ recommendation and a 20% upside potential, Axis Capital began covering Swiggy on December 16 with a target price of INR 640 per share. According to the broking, Swiggy, the second-biggest qcom/food delivery company in India, offers an alluring investment opportunity.

    Swiggy launched ‘One BLCK’ a few days ago, offering customers an invite-only membership for an “elevated” experience that included an On-Time Guarantee and quicker delivery for all food orders. All of the advantages of the current Swiggy One membership, such as unlimited free deliveries on both food delivery and Instamart, as well as special member-only discounts on food delivery and dineout, would also be available to One BLCK members, according to Swiggy.

    In an intensified effort to increase food delivery, Zomato has been concentrating on shortening delivery times and expanding restaurant availability. Zomato claimed to have observed an increase in platform usage since delivery times have decreased and food has arrived more quickly.

    Swiggy Launches “One BLCK” Membership Plan
    Swiggy unveils “One BLCK,” a premium membership plan designed to offer exclusive benefits and services for its loyal customers.
    StartupTalkyNitin Konde

  • GST Council Provides Resolutions to Various On-Going Issues

    Several important topics were discussed at the 54th Goods and Services Tax (GST) Council meeting, including online payment processing, the use of helicopters for religious reasons, and the taxation of R&D in educational institutions. In August 2024, India’s Goods and Services Tax (GST) receipts were INR 1.75 lakh crore, down from INR 1.82 lakh crore the month before.

    Digital payments, insurance, and education are just a few of the areas that could be affected by the several recommendations that the Council considered, even though the overall rise of GST was relatively constant at about 10%, showing resilience in domestic revenue collection. The government’s cautious approach to tax reforms was signaled when these suggestions were forwarded to the fitment committee for additional examination.

    Growing Domestic Revenue and GST Patterns

    GST receipts in India increased by 10.1% to INR 9.14 lakh crore in the first half of the fiscal year. There was a 9.2% increase to INR 1.25 lakh crore in domestic revenue, and an even quicker growth of 12.1% to INR 49,976 crore in revenue from imports. Despite a reduced rate of growth in net domestic revenues (4.9 percent after refunds), this expansion exemplifies the economy’s continuous recovery.

    Notably, overall net GST revenue stood at INR 1.5 lakh crore, representing a 6.5 percent increase compared to the same month last year. Integrated Goods and Services Tax (IGST) revenues recorded a greater gain of 11.2 percent. A further important factor was the distribution of refunds, which totaled INR 24,460 crore (58% of which went to domestic refunds and the rest to exporters).

    The insurance sector plays a significant part in India’s tax system; in 2023-24, the federal government and individual states collected INR 8,262.94 crore from health insurance premiums and INR 1,484.36 crore from reinsurance premiums.

    Helicopter Services Subject to Lower GST Rates

    The GST Council eased the financial burden on tourists and pilgrims by lowering the tax on religious helicopter services from 18% to 5%. Devotees who use helicopter services for pilgrimages to religious locations around India are expected to feel less financial strain as a result of this action.

    In areas where pilgrimage sites are difficult to reach, this GST cut will make helicopter services more cheap, encouraging more people to travel there for religious purposes.

    Market Behaviour and Insurance Rates

    Discussions regarding the Goods and Services Tax (GST) on health and reinsurance premiums have also centered on the insurance industry. Health insurance premiums generated INR 8,262.94 crore for the government as of August 2024. Nevertheless, the insurance sector’s taxation has not been changed in any significant way.

    Following the meeting of the GST Council, the stock market responded to the premium uncertainty by trading down in the shares of Star Health, ICICI Lombard General Insurance, and Go Digit General Insurance. These businesses could feel the effects of the upcoming health insurance pricing decision, which has already dampened investor enthusiasm.

    Examining Research and Development Efforts

    Given the notices received by DGGI to universities regarding research funds, the fitment committee will conduct an additional evaluation of the subject of GST on R&D operations in educational institutions. Some universities, like Punjab University and IIT Delhi, have received notifications regarding research funding worth INR 220 crore; they are now seeking for clarification regarding the treatment of these grants under GST.

    Institutions of higher learning that depend on research funding are particularly affected by the decision about the GST applicability to these awards. The academic sector may need to consider the recommendations of the fitment committee in the long run.

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    StartupTalkyPrithvi Durai