From FMCG to auto and BFSI, GST rationalisation sets stage for festive AdEx surge

New Delhi: The Goods and Services Tax (GST) Council has approved an overhaul of India’s indirect tax regime, collapsing the four-slab structure into two rates, 5% and 18%, effective September 22, the first day of Navratri. 

A special 40% slab will apply to sin and luxury goods such as high-end cars, tobacco products, racing vehicles and yachts.

The 56th Council meeting, which stretched for 10.5 hours, delivered rate cuts on essentials and consumer durables, simplified hotel tariffs, corrected inverted duty structures in textiles, and exempted life and health insurance from GST. 

While India Inc welcomed the measures as a “GST 2.0 moment,” marketers see a direct consumption push that could translate into a sharper spike in festive advertising and media spends.

For marketers, the timing, just ahead of the festive season, makes the GST cuts particularly significant. As private consumption accounts for over 60% of India’s GDP, the Council’s move is set to spur household spending, unlock new demand across categories, and trigger a sharper rise in festive advertising and marketing investments.

Cheaper staples to lift FMCG and retail AdEx

Daily-use products are among the biggest beneficiaries. GST on roti, paratha, khakra, pizza bread and paneer has been cut to nil, while butter, ghee, cheese, condensed milk, dry fruits, biscuits, corn flakes and ice cream now fall under the 5% slab instead of 12–18%. FMCG staples such as shampoos, soaps, toothpastes, talcum powder, and hair oil also move down to 5% from 18%.

Industry leaders expect this to ease household budgets and spur demand. CII DG Chandrajit Banerjee called the move a “phenomenal milestone” that strengthens the foundation for growth. PHDCCI President Hemant Jain said the cuts on essentials “will ease household budgets and stimulate demand.” 

Parag Milk Foods Chairman Devendra Shah noted that lower taxes on dairy products will benefit both consumers and farmers: “Higher demand will allow farmers better income stability and the confidence to invest in better cattle care and feed.” 

For advertisers, the newfound affordability is likely to encourage sharper investments in vernacular and regional campaigns to capture semi-urban and rural markets.

Autos, components and hospitality gain momentum

The automotive sector has secured long-awaited relief, with small cars, entry-level bikes and mid-sized appliances moving to 18% from 28%, while electric vehicles remain at 5%. Premium cars and racing vehicles, however, now fall under the 40% slab. 

Mercedes-Benz India MD & CEO Santosh Iyer said the revision is “progressive” and will bring “much-needed impetus by boosting consumption and momentum in the automotive industry, which remains the pulse of the Indian economy.”

Auto component makers will also benefit as all parts are brought under a uniform 18% slab, down from 28%. ACMA DG Vinnie Mehta said this would “curb the grey market, ease compliance, support MSMEs and enhance competitiveness.” 

With vehicles and components becoming more affordable, auto brands are expected to push festive campaigns around affordability, finance schemes and EV adoption.

Hospitality has also received a boost with hotel tariffs simplified into two slabs: rooms up to Rs 7,500 at 5% and those above Rs 7,500 at 12%. FHRAI President K Syama Raju said the move would “make Indian hotels more attractive, directly boost tourism demand and increase occupancy,” giving the hospitality sector more ammunition to intensify holiday and travel marketing.

Insurance and agriculture open new marketing opportunities

Perhaps the most consumer-friendly reform is the exemption of all individual life and health insurance policies from GST, cutting the tax from 18% to nil. Finance Minister Nirmala Sitharaman said the government will ensure insurers pass on the benefits to consumers, thereby boosting affordability and coverage. 

For BFSI brands, the exemption creates fresh opportunities to highlight affordability and expand penetration through festive-themed campaigns.

Farmers too are set to benefit from reduced GST on fertilisers, biopesticides, tractors (below 1,800 cc), drip irrigation nozzles, sprinklers, soil preparation and harvesting machinery, all down to 5%. 

Shah of Parag Milk Foods said this relief, coupled with higher demand for dairy, could “uplift rural livelihoods and strengthen the economy.” The agriculture push is expected to encourage rural marketing campaigns and brand activations during the festive season.

Not all categories win

While most sectors gained, carbonated and sugary beverages will cost more, with GST rising to 40% from 28% or 18%. Popular soft drink brands like Coca-Cola and Pepsi may need to recalibrate marketing strategies, focusing on value packs, premiumisation or healthier alternatives to offset the price impact.

Wider economic and AdEx impact

The Revenue Department estimates the rate rationalisation will cost Rs 48,000 crore but insists the move is fiscally sustainable. Economists believe the simplified two-slab system could add 0.5 percentage points to GDP growth within two years, offsetting the drag from recent US tariffs on Indian exports.

Mahindra Group CEO & MD Anish Shah called the reforms “transformative,” noting that the two-slab structure will simplify compliance, expand affordability and energise consumption. Deloitte India’s Indirect Tax Leader Mahesh Jaisingh said the decisions go beyond rate rationalisation to address structural issues and enhance business confidence.

For advertisers, the implications are clear: as consumption revives across FMCG, auto, hospitality, BFSI and agri categories, festive AdEx is set for a significant boost. Brands that move quickly to align messaging with affordability, regional relevance and consumer aspirations are likely to capture the lion’s share of the festive wallet.