Goods and Services Tax Rejig to Make Food and Durables Cheaper: BoB Report

India is going to receive a significant boost as the government is moving towards simplifying the Goods and Services Tax (GST) structure by reducing the number of tax slabs as well as lowering rates on key items.

How Will The GST Push Help India?

The current four-tier system will get simplified to become a two-tier system, with the proposed tax overhaul.

According to a report by the Bank of Baroda (BoB), major relief comes from reducing 12% to 5% and the 28% to 18% slab. This means that a host of consumer goods as well as durable items are going to become more affordable.

The report estimates that 11.4% of Private Final Consumption Expenditure (PFCE) will benefit directly from GST rate rationalisation.

According to the bank, taxable consumption is pegged at Rs 150-160 lakh crore, the reforms are expected to add Rs 0.7-1 lakh crore to consumption, equivalent to 0.2-0.3% of GDP from the second half of FY26.

According to the report, "The effective tax rate is expected to come off to 14-15% of taxable GST goods and services. This is estimated using our computed Rs 150-160 lakh crore taxable consumption group."

The report also noted that food products are going to be some of the biggest beneficiaries, with milk, cheese, oils, fats, sugar, confectionery, and processed food expected to move from the 12% slab to 5%. These items account for a significant share of household budgets.

Additionally, on the durable goods side of things like air-conditioners, LED/LCD televisions, dishwashers, and motor vehicles will see their GST rates decline from 285 to 18%.

This move is also expected to revive demand in the customer durables sector, which has been under pressure and has recorded just 2.6% growth in the first quarter of FY26 as compared to 10.7% in the same period last year.

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