If you ask some ecommerce startups in India, Diwali has come early this year with the Centre announcing a bumper sale on the Goods And Services Tax rates.

On 15th August this year, Prime Minister Narendra Modi announced next-generation GST reforms, to present a tax framework which enhances “ the quality of life of every last citizen”. Followed by this announcement, the Ministry of Finance released new GST rates earlier this week, effective from September 22nd.

While there are goods that are taxed at higher than 18%, the simplified GST rate structures have reduced the tax on a bulk of the eligible goods (see below). And many large manufacturers have committed to passing on the savings to consumers by reducing the retail price on goods.

Soon after the announcement, ecommerce stocks went on a roll. Yesterday, the shares of beauty marketplace Nykaa touched a 52-week high and omnichannel kids wear brand FirstCry’s shares was trading 13.88% higher than its previous close.

While almost every industry is currently wrapping their heads around the GST cut rates, the festive clock is ticking.

Soon traditional markets will be flooded with offers, there will be festive sales on ecommerce platforms — will the new GST rules spur consumption in this peak sales season?

GST Shrinks On Festive Favorite Commodities

“If you look at how consumption has fared over the last few quarters, while rural consumption has been on a recovery trend, urban consumption has been fairly subdued,” said Yuvika Singhal, economist at independent research firm QuantEco.

The biggest argument in favour of the GST cuts was that it would encourage consumer spending and revive urban consumption, especially during the festive season.

As per the ministry of statistics, commodities such as food & beverages, clothing and footwear, housing, and fuel and light accounted for a huge chunk of consumer spending in the 2024 festive season. Here’s how each of these heads is treated under the new GST regime:........

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