Price Cuts, Buyers' Rush: How India Welcomed Day One, GST 2.0

(MENAFN- Live Mint) Businesses reported a deluge of sales and enquiries on Monday, as buyers rushed to snap up products and services that turned cheaper at the dawn of GST 2.0. Makers of automobiles to home appliances noted the increase in demand as the festival season gets into full swing, with the nine-day Navratri festival starting on Monday.

Maruti Suzuki India Ltd, India's largest carmaker, said customer response to price cuts has been phenomenal, something the company has not seen in the last 35 years.

“On the very first day, we recorded 80,000 enquiries, and have already delivered over 25,000 cars, with deliveries expected to touch 30,000 shortly. Since 18 September, when we announced additional price reduction (over and above GST), we have received 75,000 bookings, with nearly 15,000 bookings coming in every day-about 50% higher than usual,” said Partho Banerjee, senior executive officer (marketing and sales). Demand for small cars has jumped 50%, and enquiries remain "very high,", Banerjee said, adding Maruti Suzuki may even run out of stock for certain variants. "Dealers are staying open late into the night to deliver cars to customers. Compared to last year, the overall response has been exceptionally strong,” he said.

Sales of air-conditioners and TV sets surged as buyers flocked to cheaper deals offered by retailers, PTI reported. Home appliances earlier taxed at 28% are now taxed at 18%. "Trends of primary regular sales are encouraging. Till 5 pm in the evening, our dealers have reported almost double sales, compared to any other Monday," Haier India president N.S. Satish told PTI. Blue Star managing director B. Thiagarajan termed the mood "upbeat", citing enquiries. "Rough estimate is that growth compared with September last year will be around 20%. E-commerce players' big sale begins today and the prices will be watched by many consumers before deciding to buy," he told PTI.

Prediction turns right

The surge appeared to vindicate finance minister Nirmala Sitharaman's 5 September prediction of a sales boom. In an interview with Mint , the minister had said,“In all likelihood, from 22 September, people will go out there to buy. Absolutely, there's likely to be a surge, like the post-covid 'revenge buy,'", the minister had said. With festive purchases getting a boost on account of the tax cuts, the government will be able to make up for the impact rate cut this financial year itself, she had said.

ITC Ltd chairman and managing director Sanjiv Puri termed the rollout of next-generation GST reforms as a "historic moment" that would make products more affordable, boost consumption, and energize small and medium enterprises. In a LinkedIn post, Puri welcomed the prime minister's announcement of the reforms on the eve of Navratri, calling it "far-sighted and pathbreaking" and a step that would accelerate India's journey to 'Viksit Bharat'.

Also Read | GST 2.0 takes effect on Monday. What it means for companies and consumers

Prime Minister Narendra Modi called it a GST Savings Festival. On social media, he wrote that lower tax rates mean more savings for every household and greater ease for businesses, a day after he said the tax cuts will accelerate India's growth.

Modi, who was in Arunachal Pradesh, interacted with local traders and retailers in Itanagar who showcased their products and highlighted the impact of GST reduction on prices. Modi told them he has become a brand ambassador for their products, while urging them to display banners urging for 'swadeshi' movement in purchases.

Public engagement

Finance minister Sitharaman visited Laxmi Nagar in the capital and interacted with shopkeepers and consumers, marking the implementation of GST reforms and urged everyone to buy and sell Made in India products. Nadda, national president of BJP and health minister, visited Lajpat Nagar in the capital and discussed GST reforms with the shopkeepers and traders.

The active engagement of the political executive and the messaging to businesses and consumers that the government wants the tax cut benefits to be passed on consumers without fail has prompted thousands of businesses to make public announcements about lowering of prices.

Chief economic advisor V. Anantha Nageswaran said at a Network18 event in the capital that the country's economy is likely to grow closer to the upper end of the government's projected range, aided by GST reforms. The Economic Survey had projected India's economy to expand between 6.3% and 6.8% in FY26.

Also Read | How are consumer companies preparing for the GST rate cut rollout?

The outreach campaign comes even as the consumer affairs ministry prepares to share data on consumer complaints about corporate profiteering with the Central Board of Indirect Taxes and Customs (CBIC) and other authorities for timely action.

Opposition Congress party, however, sounded sceptical and criticized the government for what it described as 'a delayed GST reform,' and for making“everything into an event.” Party leader Jairam Ramesh alleged that the Indian economy has not come out of the shock of demonetization and the introduction of GST eight years ago, two events that were timed close to one another.

Passing on benefits

The benefit of scrapping 18% GST on individual life and health insurance premium is entirely being passed on to customers, said Amit Chhabra, chief business officer, general insurance, Policybazaar.“The discounts have also resulted in a significant uptake of policy on our website. I feel that the government's decision to exempt individual life and health insurance policy premium from GST has not only made products cheaper for customers but it has also helped in raising awareness about insurance products that will help in increasing insurance penetration in the country,” Chhabra added.

GST 2.0 has brought cost rationalization for energy transition as the tax rate on renewable energy components including solar cells, biogas plants and windmill equipment has been reduced to 5% from 12%, industry representatives said. They said that the price cut has been implemented and billings starting Monday have factored in new prices.

Also Read | GST cuts make petrol bikes cheaper-but EV stocks are soaring anyway

Amit Paithankar, CEO and whole-time director, Waaree Energies Ltd said,“The reduction of GST on renewable energy devices and equipment to a uniform 5% will lower project costs and accelerate the capacity addition needed to meet India's clean energy targets. This development will directly help reduce the overall cost of solar modules. While the exact reduction depends on project specifications and configurations, customers can expect a tangible decrease in module prices, further strengthening the case for solar adoption.” Paithankar said that while the new rate may temporarily increase the issue of inverted taxation, the government's focus on faster input tax credit (ITC) refunds should help address this.

Pinaki Bhattacharya, founder, MD and CEO, Ampin Energy Transition said,“While the focus on domestic manufacturing has contributed to rising energy costs, the recent GST rationalization provides timely relief. By helping to moderate cost pressures, it will accelerate the wider adoption of renewable energy, green hydrogen, and energy storage solutions.”

Solar, tractors

According to estimates by Icra, the rate rationalization for solar PV modules and wind turbine generators is expected to reduce the capital cost for solar and wind power projects by 5%. It is expected to reduce the cost of generation for solar power projects by 10 paise per unit and for wind power projects by 15-17 paise per unit, which in turn may reflect in the power prices for consumers in upcoming projects.

Renewable energy is a focus area of the government given its ambitious target to achieve 500 GW of non-fossil capacity by 2030 and net zero carbon emission by 2070. Estimates by the union ministry of new and renewable energy show that the reduction in GST is expected to lower the levelized renewable tariffs easing the financial burden of electricity procurement for distribution companies which could translate into nationwide annual savings of ₹2,000–3,000 crore in power procurement costs.

Union minister for new and renewable energy Pralhad Joshi said that renewable energy developers and investors in the energy transition space are likely to save ₹1-1.5 trillion due to the GST cut as India eyes to about 248 GW of non-fossil power generation capacity by 2030.

Also Read | Govt may let developers exit stalled renewable projects without penalties

Tractor manufacturers said they have reduced the price and passed on the benefits to customers.“We have passed on the entire GST reduction from 12% to 5% to our customers, making our equipment more affordable and accessible. The initial response has been encouraging, and we expect the full impact to be more visible in the coming days as the implementation gathers pace. This move underscores our commitment to supporting farmers with world-class solutions at the right value.” said Narinder Mittal, president & managing director, CNH India. International Tractors LTD, maker of Sonalika brand of tractors has also reduced prices.

Sudarshan Jain, secretary general of Indian Pharmaceutical Alliance, said the industry body representing 23 leading research-driven companies, is fully committed to ensure that the GST benefits reach citizens swiftly and transparently, advancing its mission of affordable and accessible healthcare for all.

“Most medicines, earlier taxed at 12%, will now attract just 5% GST. In addition, 36 critical life-saving drugs for cancer, genetic and rare diseases, and cardiovascular conditions have been fully exempted. The GST Council has also rationalised tax slabs on health and life insurance premiums, glucometers, and corrective spectacles,” said Jain.

Sumant Sinha, founder, chairman and CEO of ReNew Energy Global Plc, said the company was proud to pass on the full benefit to our customers.“We believe this move will catalyze adoption across segments, from large-scale developers to rooftop consumers and farmers." The company said the GST reduction will translate into direct savings of up to ₹10 lakh per megawatt (MW) for modules which are produced with imported components in the country and up to ₹15 lakh per MW for locally-made modules for utility-scale projects.

(Dhirendra Kumar, Vijay C Roy, Rhik Kundu, Priyanka Sharma and Subhash Narayan contributed to this story)

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