In a significant move to make consumer goods more affordable, the Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, has approved a transformative two-tier GST rate structure of 5% and 18%, eliminating the previous 12% and 28% slabs. This reform, announced as a “Diwali gift” by Prime Minister Narendra Modi during his Independence Day speech, is set to reduce prices for a wide range of electronic products, including mobile phones, televisions, air conditioners, and refrigerators, effective from September 22, 2025.
Impact on Electronic product And industry
The electronics industry, long burdened by high GST rates, is expected to see a significant boost in demand as approximately 90% of items previously taxed at 28%—such as air conditioners, dishwashers, and TVs larger than 32 inches—will now fall under the 18% slab. Similarly, 99% of items in the 12% slab, including some smaller electronic gadgets, are proposed to shift to the 5% bracket. This restructuring aims to address the inverted duty structure, where input materials were taxed at higher rates than finished products, freeing up working capital for manufacturers and enhancing competitiveness.
New GST Rates (Photo Credit – AI)
Impact on Consumers and Pricing
The reduction in GST rates is expected to make electronics more affordable for Indian consumers. For instance:
- Mobile Phones: Previously taxed at 18%, mobile phones will remain in the 18% slab, but the removal of the compensation cess by March 2026 is anticipated to stabilize prices further.
- Televisions: TVs with screens larger than 32 inches, previously taxed at 28%, will now attract an 18% GST, potentially reducing the cost of a 40-inch LED TV by thousands of rupees. TVs under 32 inches were already taxed at 18%, and some smaller models may shift to the 5% slab.
- Air Conditioners and Refrigerators: High-ticket items like ACs and refrigerators, previously classified as luxury goods with a 28% GST, will now be taxed at 18%, making them more accessible to middle-income households.
- Small Appliances: Daily-use items such as pressure cookers, sewing machines, and small washing machines are likely to move to the 5% slab, significantly lowering costs for budget-conscious consumers.
A senior official noted, “The lower rates will increase consumption, reduce tax evasion, and widen the tax net, offsetting any short-term revenue loss.” The reforms are projected to boost demand in the consumer durables sector, particularly during the festive season.
Industry Reactions and Challenges
Industry leaders have welcomed the reforms but emphasized the need for clarity on implementation. Major manufacturers like Samsung, Godrej, and Voltas, previously unable to pass on tax benefits due to high GST rates, are now optimistic about offering competitive pricing. However, they face challenges from cheaper imports, and the industry continues to advocate for reduced customs duties on raw materials to lower input costs.
The electronics sector has historically faced high tax rates, with consumer electronics often labeled as “luxury items” despite their widespread use in Indian households. The new GST structure aims to correct this perception, aligning tax rates with the essential nature of these goods in modern life. For instance, the shift of small cars and daily-use electronics to lower slabs reflects a focus on affordability and economic growth.
Benefits for Businesses and MSMEs
The reforms also simplify compliance for businesses, particularly Micro, Small, and Medium Enterprises (MSMEs). Pre-filled GST returns, faster refund processes, and streamlined registration are expected to reduce administrative burdens. The ability to claim input tax credits (ITC) on inventory purchases remains crucial for electronics retailers, though challenges persist for small businesses in navigating complex compliance requirements.
Looking Ahead
The GST Council’s next meeting, scheduled for early September 2025 in New Delhi, will finalize these reforms, with states and the Centre working to build consensus. While the elimination of the 12% and 28% slabs is a bold step, a special 40% slab for luxury and sin goods, such as high-end cars and tobacco, has been proposed to maintain revenue streams.
As India moves toward a simpler, more transparent tax regime under GST 2.0, consumers can expect more affordable electronics, while manufacturers gain a competitive edge. With Diwali 2025 approaching, these reforms promise to light up the festive season with savings for millions of Indian households.
Source – https://www.gst.gov.in/
