Impact of GST Rationalisation on the Indian Middle Class:

In a move set to provide significant relief to the Indian middle class, the central government's recent Goods and Services Tax (GST) rationalisation is expected to increase disposable income and reduce the financial burden on households. According to Saurabh Agarwal, Partner at Ernst & Young (EY), the GST cuts on daily essential items could save a salaried individual earning ₹50,000 per month nearly ₹1,275—equating to a 2.55% increase in monthly disposable income. Sharing his insights on social media platform X, Agarwal explained how the GST revisions on food items, medical bills, and other daily-use products are likely to make a tangible difference in the lives of common citizens. “The price cuts on daily essentials are expected to save a person earning ₹50,000 monthly approximately ₹1,275 a month—an effective 2.55% increase in disposable income,” he said. Relief for Households Amid Rising Costs This GST rationalisation comes at a crucial time when global economic uncertainties and inflation have been affecting household budgets. By reducing the GST rates on everyday commodities, the government aims to boost consumer confidence and spending, which in turn is expected to support economic growth. “This increased spending power acts as a crucial buffer, insulating our economy from global uncertainties,” Agarwal noted, underlining the broader macroeconomic implications of the tax cuts. What’s Getting Cheaper? As per earlier reports by Mint, a total of 375 items are set to become more affordable starting Monday, September 22, 2025, under the new GST regime. These include: Daily-use food items: Milk, coffee, condensed milk, biscuits, butter, cereals, corn flakes, and packaged drinking water (20-litre bottles) Personal care: Face creams, face powders, after-shave lotions Electronics and appliances: Air conditioners (ACs), dishwashers, televisions, and washing machines The reductions in GST are expected to make a visible difference in monthly household expenses, especially for middle-class families who rely on these items regularly. What’s Getting Expensive? While essentials are becoming more affordable, the government has increased the GST to 40% on luxury and sin goods as part of its revenue rationalisation: Sin goods: Pan masala, gutka, tobacco products, cigarettes, and tobacco substitutes Luxury vehicles: Cars with engine capacities over 1,200cc and longer than 4 metres High-end two-wheelers: Above 350cc Beverages: Soft drinks and other non-alcoholic sugary beverages This sharp hike reflects the government's strategy of discouraging consumption of unhealthy and luxury goods while making essential commodities more accessible. A Boost to Consumption-Led Growth Experts believe the GST rate rationalisation will not only provide short-term relief but also enhance long-term consumer spending. With increased disposable income, families may spend more on retail, services, and health, contributing to broader economic activity. In conclusion, the latest GST cuts are a welcome move for Indian households, especially the middle class. While luxury and sin goods get costlier, everyday items becoming cheaper is expected to put more money in the hands of consumers—fueling a much-needed boost to the Indian economy.

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