The GST system is influencing how consumers make choices, encouraging them to pick products with fair prices that already include tax.
Published Sep 10, 2025 | 9:00 AM ⚊ Updated Sep 10, 2025 | 9:00 AM
For a heavy consumer state like Kerala, the new GST reforms will have a significant impact. The changes will influence the consumers' purchasing decisions, their spending habits, and the state's overall economy. (Wikimedia Commons)
Synopsis: As GST 2.0 takes shape, Kerala faces a difficult situation. On one hand, households could benefit from cheaper goods and more disposable income, which could drive growth. On the other hand, the state risks losing revenue, especially if taxes on things like lotteries are tightened and GST compensation is not guaranteed.
The changes to the Goods and Services Tax (GST), announced on 3 September, have evoked a mixed response, especially in Kerala.
While the state government is concerned about a potential revenue loss, the middle class has warmly welcomed the tax reductions.
The GST Council made a significant move by simplifying the tax structure. It scrapped the 12% and 28% tax slabs, and many items have now been moved to the lower 5% and 18% rates. This is a major change designed to make the tax system easier to understand and to encourage people to spend more.
Finance Minister Nirmala Sitharaman stated that the changes are more than just a simple rate revision—they are fundamental reforms. Starting 22 September, there will be only two main tax slabs for the Indian consumer.
The reforms aim to improve “ease of living” for the average citizen. According to the government, these decisions were made with the common person’s well-being as the main priority.
For the average Indian middle-class family, managing the household budget is a constant challenge. They are always looking for ways to stretch their income to meet their needs. The latest GST reforms are a welcome change as they are giving a new look to the prices of everyday Fast-Moving Consumer Goods (FMCG).
A wide range of essential products is now becoming more affordable. Items like ghee, nuts, and bottled water, which are staples in many kitchens, will now cost less. Similarly, personal care products such as shampoo and toothpaste are also becoming cheaper.
Additionally, high-value consumer durables like televisions, refrigerators, and washing machines will also see a price drop. Since these goods are directly tied to household consumption, the GST reforms will significantly help middle-class families balance their budgets and improve their quality of life.
Following the new GST structural reforms, many of India’s top consumer companies are already adjusting their marketing plans for the upcoming festive and Christmas seasons. Since the tax cuts will take effect on 22 September, these companies are planning to attract new customers by offering lower prices to boost sales and increase their market share.
Companies like Reliance Retail, LG, Sony, Daikin, Haier, Blue Star, Parle Products, Amul, and V-Mart Retail are all preparing to increase their spending on advertising and promotions. This increased activity will begin with Navratri and continue through December, which is the period of the highest consumer demand in the country.
This period of increased spending and lower prices is perfectly timed, as it coincides not only with the festive season but also with the wedding season. This combination is expected to significantly drive up annual sales for many product categories that have seen a reduction in GST.
For a heavy consumer state like Kerala, the new GST reforms will have a significant impact. The changes will influence the consumers’ purchasing decisions, their spending habits, and the state’s overall economy.
Kerala’s economy is driven by its high consumption and strong demand for long-lasting goods, rather than by production. This is due to several factors: a highly educated population, remittances by expats in the Middle East, increasing urbanisation, and the influence of global media. These factors have led to a shift in people’s food habits and an increase in spending on lifestyle products.
Kerala’s Finance Minister KN Balagopal has predicted a significant drop of ₹8,000 crore to ₹9,000 crore in the state’s GST revenue. However, this isn’t a major concern for the average person in Kerala.
After a recent festive season, consumer companies have already offered significant discounts on their products. The finance minister stated that Kerala is not against people benefiting from these tax cuts. He pointed out that when states lose revenue, it often hurts the weaker sections of society.
Families will see price changes in everyday goods depending on the final GST reforms. These reforms promise great benefits for the common person, even though they have drawn criticism from Kerala. In Kerala, the biggest revenue losses are expected to be in the automobile and insurance sectors.
The tax cut on automobiles alone, from 28% to 18%, is predicted to cause a revenue loss of ₹1,100 crore. While Kerala’s population is only 2.75% of India’s total, Keralites account for 15% of the country’s market for durable goods. As a consumer-driven state, price levels are important to every resident. A drop in the prices of essential goods would allow households to save more money and improve their financial well-being.
The GST system is influencing how consumers make choices, encouraging them to pick products with fair prices that already include tax. This is especially true for home appliances and electronics, where people prefer to buy items with the lowest prices.
GST has also helped formalise the economy by bringing more businesses into the tax system. This has improved product quality and built consumer trust, leading to a preference for branded and certified goods.
The prices of goods and services have changed under GST. Taxes on many items like everyday products, electronics, and household goods have gone down, making them cheaper and increasing demand. However, services like telecom, insurance, and banking have become more expensive.
These price changes affect people’s spending habits—when prices are low, consumers buy more, while higher costs make them more hesitant. Overall, by lowering taxes on many goods, GST has increased consumers’ disposable income, allowing them to spend more on other things and even buy premium products.
GST has also been a major boost for online shopping. Tax rates are now standardised, making the process simpler for consumers to buy products online. The tax is included in the listed price, so customers don’t have to pay any extra amount separately. This transparency, along with the ability to compare products and a clear process for complaints, has contributed to the popularity of e-commerce websites.
Businesses have benefited from GST by reducing their costs, and they often pass these savings on to consumers through lower prices. This has increased consumers’ purchasing power.
In Kerala, this is especially important for the construction sector, which has been booming. The demand for housing, shopping malls, and other institutions is high, and a lot of the construction materials like tiles and marble are bought from other states. With GST, Kerala can now claim the IGST on these materials, which will significantly increase the state’s revenue.
GST has also improved overall economic confidence. The stability and predictability of a single tax system have encouraged consumers to spend more and invest in long-term items like real estate. This positive feeling has further stimulated economic growth.
As GST 2.0 takes shape, Kerala faces a difficult situation. On one hand, households could benefit from cheaper goods and more disposable income, which could drive growth. On the other hand, the state risks losing revenue, especially if taxes on things like lotteries are tightened and GST compensation is not guaranteed.
While GST reforms promise to be simpler, there are still challenges to overcome. The system has some flaws that need to be fixed before it can deliver its full benefits. How the GST Council addresses the concerns of states like Kerala in the coming months will be crucial.
(Views are personal. Edited by Majnu Babu).
