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The Ministry of Finance, in its Monthly Economic Review for September 2025, said that the recent GST rate cuts are poised to boost domestic demand by easing the tax burden on consumers and businesses. The move, the ministry noted, will likely spur consumption, investment and job creation across key sectors of the economy. The report highlighted that India's economic growth remains firmly supported by robust performance in both industry and services, coupled with a stable labour market. However,
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FAQ :
The recent GST rate cuts are expected to boost domestic demand by easing the tax burden on consumers and businesses, likely spurring consumption, investment, and job creation.
The GST 2.0 reforms came into effect on September 22, 2025.
The number of GST tax slabs has been reduced from four to two: a 5% rate for essential goods and an 18% standard rate for most items. Luxury and 'sin' goods will continue to attract a 40% tax rate.
India's GDP grew by 7.8% in Q1 FY26, and the growth outlook for FY26 remains strong, driven by domestic demand, favourable monsoon conditions, lower inflation, monetary easing, and the positive effects of GST reforms.
The RBI has revised its inflation forecast for FY26 down to 2.6%, with inflation expected to average 1.8% in Q3 FY26 before a mild uptick in Q4.
Despite external headwinds, domestic demand is expected to remain the key driver of growth through FY26, supported by favourable fiscal and monetary conditions.
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