GST Rate Cuts To Boost Consumption By ₹1 Lakh Crore In FY26: BoB

The Bank of Baroda (BoB) has forecast that recent cuts in Goods and Services Tax (GST) rates could spark an additional ₹1 lakh crore in consumer spending during FY26.

In a report released on September 10, the bank said the changes, which take effect from September 22, are also expected to lift India’s GDP by 0.2–0.3%.

The move is part of the government’s push to simplify GST slabs and lower taxes on essential and everyday items.

According to the BoB report, savings from these cuts are likely to boost household demand, cushioning any short-term revenue losses.

Impact on Growth and Prices

Inflation may drop by 40 basis points, the report said. SBI Research expects a sharper 65–75 bps fall in food and core items.

Economists believe this will give consumers more spending power before the festive season.

Signs of stronger demand are already visible. GST collections in August grew 6.5% year-on-year to ₹1.86 lakh crore, reflecting strong consumer demand.

Experts say the new tax cuts will give an extra boost, mainly to non-essential and discretionary spending.

Boost for FMCG and Auto Sectors

Fast-moving consumer goods (FMCG) and automobile companies are set to gain the most from the reforms.

Carmaker Mahindra has already cut prices by up to ₹1.56 lakh on select models, passing benefits directly to buyers.

Under the new GST system, most items will be taxed at 5% or 18%, replacing the earlier five-slab structure. The streamlined slabs aim to make essentials more affordable while improving compliance.

Although some estimates point to a possible ₹3,700 crore revenue loss for the Centre, Finance Minister Nirmala Sitharaman has expressed confidence that stronger consumption will offset the gap and keep fiscal targets intact.

Also Read: India’s GDP Growth Projection Upgraded To 6.9% For FY26 By Fitch Ratings