India's GST cuts to lift festive e-commerce sales by up to 20%: Executives

India’s recent goods and services tax (GST) rationalisation is set to significantly boost e-commerce sales, with industry executives projecting a 15-20% rise in high-value categories such as electronics. The move, driven by Prime Minister Mr. Narendra Modi’s government, comes ahead of the festive season and is expected to strengthen consumer demand while reducing reliance on global trade fluctuations. Executives said the reforms will create a multiplier effect across categories, from fast-moving consumer goods to domestic manufacturing. Industry leaders highlighted that by shifting products currently taxed at 12% to 5%, consumers will see daily essentials become more affordable, thereby encouraging discretionary purchases. The government’s broader overhaul will simplify the existing four-tier structure to a streamlined system of two primary slabs: 5% for essentials and 18% for standard goods, alongside a 40% rate for luxury and sin goods. Relief measures under discussion include reducing GST on small petrol and diesel cars from 28% to 18% and cutting or eliminating GST on life and health insurance premiums.
Tax experts said the reforms will boost spending power and ease compliance. Tax Partner, Ernst & Young (EY) India, Ms. Divya Bhushan, stated that the simplified structure would lower prices and strengthen the competitiveness of online platforms, while Indirect Tax Partner, Consumer Products and Retail at EY India, Mr. Achal Chawla, said the move will drive consumption and benefit quick-commerce platforms, particularly during the festive surge. He added that companies may need to upgrade systems to accommodate revised rates. The GST Council is expected to take up the recommendations soon, with Prime Minister Mr. Narendra Modi signalling that the “next-generation” reforms could be rolled out by Diwali. Once implemented, industry executives believe the changes will enhance consumer confidence, expand the reach of e-commerce and quick-commerce firms, and support India’s broader self-reliance strategy.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.