With the new GST structure coming into effect later this month, the industry is abuzz with conversations around pricing, inventory planning, and consumer demand recovery. While most commentary has focused on FMCG, retail, and auto sectors, the merchant services and payments side of the story is equally significant.
Lower GST rates will influence how merchants recalibrate pricing and manage margins. With more competitive pricing on essentials and appliances, merchants will likely see higher transaction volumes, especially in the run-up to the festive season.
Banking-tech platforms like Mintoak says that banks and merchants must leverage digital payments data to forecast demand accurately, optimize inventory, and align working capital cycles.
As categories like electronics, cement, and small cars get cheaper, higher consumer demand is expected. This creates an opportunity for banks and merchants to drive offers, EMI-based purchases, and loyalty-linked payment programs. Again, Mintoak says that partner banks can empower merchants to capture this demand through integrated payment solutions and insight-driven credit support.
India’s landmark GST overhaul condenses the tax structure into two main slabs—5% for essentials and 18% for most goods and services—while imposing a steep 40% rate on luxury and sin items. Slated for September 22, 2025, the reform aims to boost consumption, simplify compliance, and ease household expenses.
The Tech Panda takes a look at what industry players are saying about the development.
According to Hitesh Jain, Lead Analyst, YES SECURITIES’ report, “The sectoral benefits of the GST rejig are likely to be uneven but highly consequential. The fast-moving consumer goods (FMCG) sector will see the most immediate boost, with tax rates on soaps, detergents, biscuits,
and packaged food items cut from 12–18% to 5%. Automobiles are another clear winner, as small cars, hybrids, and electric vehicle components will now attract only 18% GST instead of 28%, significantly lowering ownership costs and potentially resetting demand trajectories. Similarly, consumer durables and electronics are expected to benefit from the rate shift to 18%, unleashing pent-up demand.
“Building materials, particularly cement, also see a major cut, which will ease construction costs and spur housing and infrastructure activity. Meanwhile, fertilisers, agrochemicals, textiles, and renewables gain from similar rate reductions, though certain segments such as high-value apparel and coal face higher levies to balance fiscal considerations.”
Karthik Mani, Partner, Indirect Tax, BDO India, says, “The GST rate on some of the renewable energy device such as solar power generator, windmills and wind operated electricity generator etc. has been reduced from 12% to 5%. This would lead to lower procurement costs for the renewable power generating companies and it would encourage setting up more renewable power generating facilities, marching towards the target of installation of 500 GW of non-fossil fuel electricity generation capacity by 2030.”
Dilip Modi, Founder and CEO of Spice Money, says, “By lowering GST on essentials, healthcare products, and agricultural machinery, the reform goes beyond affordability to drive empowerment and opportunity for Bharat. For rural families, reduced costs on daily-use items and school supplies mean real savings that can be redirected to education, healthcare, or growing livelihoods. For farmers, lower GST on tractors, irrigation systems, and bio-pesticides eases input costs and supports higher productivity. For micro-entrepreneurs, affordable appliances and sewing machines create new avenues for small businesses.
“This reform will boost consumption in rural India and strengthen belief in the formal economy, creating a cycle of growth, inclusion, and financial resilience. It is a timely and progressive step toward building an Aatmanirbhar Bharat.”
Anurag Sharma, Managing Director and CEO, AKAI India, says, “The new GST rate cut from 28% to 18% is a progressive reform as it will make electronic items like televisions, air-conditioners, and other appliances significantly more affordable for millions of Indian households. The 18% GST bracket enables consumers to save around INR3000 to INR5000 on major appliances and encourages them to fulfil their needs this festive season. This bold step will boost customer demand in tier II and III cities, essentially. The new GST rate cuts will also empower the entire electronics industry and fuel its momentum. Additionally, the industry will be able to enjoy faster transit times across state borders, enhanced overall operational efficiency, and reduced logistics costs.”
Gagan Sharma, Managing Director of XElectron, talks about the impact on the consumer electronics industry, “The GST 2.0 is a welcome step for both consumers and brands like ours. It not only reduces the cost burden of purchasing lifestyle electronics such as TVs and projectors but also encourages customers to opt for higher-end, larger-screen models that are often considered luxury items. The timing makes this move even more impactful, as the revised rates will come into effect during the festive season, when people actively purchase and gift electronics, giving a boost to the consumer electronics market.”
Bodhisattwa Sanghapriya, Founder and CEO of IG Drones, on what this reform means for the future of India’s drone ecosystem, “The GST reduction to 5% marks a turning point for India’s drone industry. It makes drones more affordable and accessible, while easing compliance for innovators, startups, and businesses. This will accelerate adoption across key sectors — defence, surveillance, agriculture, infrastructure, and logistics. For defence in particular, it strengthens Atmanirbhar Bharat by enabling local producers to design and deliver advanced drones tailored to India’s strategic needs. At IG Drones, we see this reform not just as a tax change but as a catalyst for innovation — one that can position India as a global drone hub by 2030, fuel indigenous manufacturing, drive exports, and build a skilled workforce for both civilian and defence demands.”
Yogesh Agarwal, CEO and Founder, Onsurity, talks about the impact of GST rate rationalisation on the business and profitability of insurance players.
“The immediate impact of GST rate rationalisation on insurers is going to be two-fold: complexity and profitability. The core challenge is around input tax credit. Since individual health and life insurance remain GST-exempt, insurers will face disputes over how much credit they can actually claim on expenses not directly tied to those exempt businesses. This will become a litigious area.
“At the operational level, insurers cannot claim input credit on large cost items such as commissions (which can be approx ~25% of premiums) and administrative expenses (~5%). This unabsorbed GST directly adds to their cost structure. In the short term, it eats into profitability, because insurers cannot instantly reprice existing policies or pass on the higher costs to customers.
“Those insurers with a heavy focus on individual health and life products will feel the pressure most, as their expense of management ratios will climb once unabsorbed credits hit their books. This further strains the IRDAI-mandated EOM thresholds, which were already a sticking point for the industry and are under constant review. Unless IRDAI revisits the EOM framework, insurers will find themselves squeezed between regulatory limits and real cost escalations.
“In short, GST rationalisation adds a new layer of compliance complexity, puts near-term profitability at risk, and forces longer-term conversations around repricing and regulatory thresholds.”
Ankur Mittal, Co-Founder, IPV, says, “GST 2.0 is a great initiative from the government that not only simplifies the tax framework but will also create a powerful base for India’s economic growth. With the removal of complex taxes and cutting on working capital blockages, it gives a consumption boost across businesses generating strong domestic demand which accounts for nearly 60% of India’s GDP. Rationalisation of GST slabs is likely to widen the tax base thus generating more revenue for the govt and at the same time bringing more businesses under a formal economy. Such reforms further improve ease of doing business. We believe GST 2.0 will deliver benefits across sectors and further strengthen its economy”.
Vimal Kejriwal, Managing Director & CEO, KEC International, says, “India’s historic GST reform is poised to drive stronger execution momentum across the infrastructure sector. The reduction in GST on cement is expected to unlock working capital, improve cash flow efficiency and accelerate project delivery timelines.
“In parallel, lower GST rates on various consumer-facing categories are likely to boost consumption, creating a more favourable environment for sustained economic activity. This, coupled with the ongoing infrastructure push, is expected to catalyse private sector capex, adding further depth to the investment cycle.
“A timely and progressive reform that aligns with KEC’s focus on faster execution, operational excellence, and balance sheet strengthening—reinforcing India’s infrastructure growth story.”
The country’s Chartered Accountants have a lot to say about this development.
CA Neha Beriwala, Partner, S K Patodia & Associates LLP, says, “The #NextGenGST reforms mark a pivotal step in reshaping India’s consumption and production landscape. Lower GST rates on food, dairy, textiles, handicrafts, and renewable energy inputs will ease input costs and strengthen MSME margins, while exporters and manufacturers will benefit from faster refunds that unlock stuck working capital.
“The simplified GST registration, effective November 1, 2025, is set to boost participation of micro suppliers and e-commerce sellers, broadening the tax base and lowering compliance barriers. The operationalisation of GSTAT will further ensure quicker, more structured dispute resolution. Together, these measures are expected to improve liquidity across MSME supply chains and enhance rural consumption.
“At the same time, sectors facing higher rates—such as tobacco and pan masala—must recalibrate pricing strategies, and businesses at large will need to upgrade invoicing and ERP systems to remain compliant. Overall, these reforms promise to enhance ease of doing business, powering India’s growth story and the vision of #ViksitBharat.”
CA Mandar Telang, Secretary – Bombay Chartered Accountants’ Society (BCAS), says, “The recent GST announcements mark a true Diwali bonanza for consumers and trade, with a thoughtful rate rationalization and detailed clarity introduced at remarkable speed. The decision to allow post-supply credit notes without the pre-condition of contractual stipulation reflects a pragmatic approach, ensuring a smooth transition into the new regime. The proposed rate rationalization is expected to make consumer goods more affordable, providing a boost to domestic consumption. For the food and agriculture sector, rate correction will ease working capital pressures. Individual Life and Health insurance will become cheaper. The pharmaceutical sector may face challenges from the widened inverted duty structure as APIs remain taxed at 18% against 5% on drugs, though timely 90% provisional refunds can mitigate the burden. The automobile industry stands to gain from reduced rates on small petrol and diesel vehicles and overall balanced tax incidence on high-end models, likely driving demand. Similarly, residential real estate projects should benefit from input tax reductions, lowering overall project costs.”
Ashish Goyal, Co-Founder and Whole-Time Director, Fibe, says, “The recent GST rationalisation marks a historic step towards simplifying India’s indirect tax structure and making essential goods and services more affordable. Among the most impactful measures is the exemption of GST on health insurance, which has the potential to transform healthcare access in India. Today, a significant portion of patients remain uninsured or underinsured, often deferring or foregoing treatment due to the high cost of premiums and out-of-pocket medical expenses. Exempting GST on insurance will not only make coverage more affordable but also encourage greater adoption, particularly among middle-income and vulnerable households. At the same time, such a move complements ongoing efforts in the healthcare financing ecosystem that support patients who do not have adequate coverage, ensuring that no one is denied care for financial reasons. This move will create a stronger, more inclusive safety net and enable healthcare decisions to be driven by medical need rather than affordability constraints.”
Anand Kumar Bajaj, Founder, MD & CEO, PayNearby, says, “The GST Council’s approval of the two-tier tax structure is a decisive and much-needed step towards simplifying and rationalising the indirect tax system. It will ease compliance and reduce input costs for MSMEs. These reforms will improve cash flow and operational efficiency for small businesses and merchants, enabling smoother management of daily transactions. By addressing long-standing challenges, these changes create a more supportive environment for business empowerment, helping MSMEs confidently scale their operations and contribute meaningfully to India’s economic growth.”
Sundeep Mohindru, Founder and Promoter, M1xchange, says, “The GST 2.0 reforms are a major development for the Indian economy and especially for the MSME sector. The reduction in input costs, simplified compliance procedures and faster refunds will help address capital requirements for small businesses and improve their competitiveness in both domestic and export markets. With 66 million MSMEs contributing around 30% of GDP and 45% of exports, the impact of these changes will be significant. Lower GST on raw materials and finished products in key sectors such as food, healthcare, agriculture and household goods is expected to support demand. The timing of these reforms, ahead of the festive season, will encourage domestic consumption and provide support to a wide range of industries.”
Gurjodhpal Singh, CEO, Tide India, says, “The simplification of GST registration is likely to encourage more businesses to join the formal tax network, driving greater participation in the economy. For these businesses, automation and real-time compliance will be crucial to quickly adapt to the new, simpler framework. More than just a regulatory change, GST 2.0 has opened the doors for fintechs to play a key role in the formalisation and scaling of small businesses, helping them thrive in a digital-first economy.”
Ranjeet Mahtani, Partner at Dhruva Advisors, says, “The rate rationalization and truly speaking rate structure rejig to keep GST true to the structure that was envisaged in 2016-2017, will boost consumption and benefit the common man. Some businesses will witness an enhanced rate while others will have to grapple with inverted duty structure owing to rate reduction for inward supplies or, unavailability of input tax credit due to an exemption kicking in, potentially impacting price to the customer.
“The GST Council and Governments (Centre and State) have conveyed deep faith in the Indian businesses, that all rate cut benefit will be passed on to the customers/consumers. This is also because the Anti Profiteering provisions yielded lesser than Rs. 4500 crores from less than a 100 cases that were booked. Nonetheless, it will be interesting how the tax administrators will enforce and police such passing of rate cut when the statute prescribes that rate change benefit as also input tax credit benefit will be passed on to the recipient by way of commensurate reduction in price.”
Amit Baid, Head of Tax at BTG Advaya, says, “GST 2.0 is a watershed moment in India’s indirect tax regime. By collapsing multiple slabs into just two primary rates, it is not just a reform but a potential growth driver at a time when India is grappling with harsh US tariffs and global headwinds. Lower rates on consumer-facing essentials and durables aim to put more money in the hands of households and spur demand at a time when consumption has been uneven. The exemption of life and health insurance is also a strong signal towards making social security more affordable. However, businesses will be keenly watching the implementation challenges – migration of classification, input credit balances, and transition provisions could pose practical hurdles in the short term.”
