FICCI welcomes GST rationalisation aimed at boosting consumption

The GST Council, chaired by Finance Minister Nirmala Sitharaman, on Wednesday announced a restructuring of tax slabs, reducing them to two—5% and 18%, and introducing a 40% rate for luxury and sin goods.

Federation of Indian Chambers of Commerce and Industry (FICCI) hailed the move as a landmark reform that will strengthen growth across sectors.

“The rationalisation of GST rates into a simplified two-tier structure (18% and 5%), with a special de-merit rate for select goods, is a consumer-focused and growth-oriented reform that will bring transparency, predictability, and stability to India’s tax system. It will directly benefit households, labour-intensive industries, MSMEs, and critical sectors such as healthcare, agriculture, infrastructure, and automobiles—reducing costs for consumers, providing relief to businesses, and boosting consumption-driven growth,” said the statement.

“The GST rate rationalisation exercise carried out by the government and approved by the GST Council is a landmark reform, and FICCI commends the GST Council for the same. The simplification of the tax structure will offer multiple benefits. It will reduce classification disputes, improve compliance and address anomalies on account of the inverted duty structure. While there are revenue implications of the announced measures as outlined by the government, the important point to note is the improvement in economic sentiments that the reduction in rates will lead to and which in turn will boost consumption demand. This is a major positive for the economy, both in terms of lifting growth and containing inflation,” said Harsha Vardhan Agarwal, President, FICCI.

The statement noted that lower GST on essential items and FMCG products will ease household budgets, while reduced rates on farm machinery, fertilisers, and industrial inputs will cut costs and encourage investment. Labour-intensive sectors such as textiles, leather, and footwear will benefit, along with the auto sector, cement, and construction materials. A reduction of GST on lifesaving drugs to 5% is expected to lower treatment costs and improve access.

“The changes announced by the GST Council will boost consumption, improve the competitiveness of industry and enhance the ease of doing business, particularly for small businesses. We find many suggestions made by FICCI across sectors being accepted, and we are grateful to the Prime Minister, Finance Minister and all members of the GST Council for ushering in this major structural reform. Industry is committed to passing on the benefits of lower rates to the consumers, and FICCI will work with its members towards this,” said Anant Goenka, Senior Vice President, FICCI.

FICCI added that the reforms will impact exports and competitiveness, correcting inverted duty structures and improving the global cost positioning of Indian goods.

“The reduction in the number of tax slabs and movement of a plethora of goods and services to the ‘merit rate’ of 5% will give a big boost to the economy, with consumption demand expected to move up in the days ahead. The stimulus that the announcements made by the government will provide to the economy will be long-lasting and ensure that India continues to move ahead on the path of a high-growth economy,” Jyoti Vij, Director General, FICCI, said.

The body also welcomed operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT), faster refunds for small exporters, and clarifications on intermediary services and post-sale discounts, noting that these steps will reduce disputes and ease compliance.

“Industry is committed to passing on the benefits of lower rates to consumers. With these reforms, India moves decisively forward towards achieving the goal of Viksit Bharat, ensuring growth, jobs, and prosperity for all,” the release added.