{"id":2103,"date":"2026-09-21T08:30:39","date_gmt":"2026-09-21T08:30:39","guid":{"rendered":"https:\/\/newsraise.com\/in\/2026\/09\/21\/higher-commodity-prices-offset-gst-cut-benefits\/"},"modified":"2026-09-21T08:30:39","modified_gmt":"2026-09-21T08:30:39","slug":"higher-commodity-prices-offset-gst-cut-benefits","status":"publish","type":"post","link":"https:\/\/newsraise.com\/in\/2026\/09\/21\/higher-commodity-prices-offset-gst-cut-benefits\/","title":{"rendered":"Higher commodity prices offset GST cut benefits after a year"},"content":{"rendered":"\n<!-- Quick Adsense WordPress Plugin: http:\/\/quickadsense.com\/ -->\n<div class=\"9fece8afa224fd09e54b043d0febfb58\" data-index=\"1\" style=\"float: none; margin:10px 0 10px 0; text-align:center;\">\n<script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<!-- NR ATF -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-8898941184964366\"\r\n     data-ad-slot=\"4839033563\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<p>One year after the Indian government trimmed the Goods and Services Tax (GST) on a wide range of products, the initial boost to consumer spending is being eroded by rising commodity prices. Data from rating agencies, industry bodies and company statements show that while some segments, notably automobiles, have retained much of the benefit, others such as fast\u2011moving consumer goods (FMCG), apparel and mid\u2011market hotels are seeing price pressures that narrow the net gain for buyers.<\/p>\n<h2>Automobile sector retains most of the upside<\/h2>\n<p>Automobiles emerged as the clearest winner from the GST rationalisation. The reduction of several tax slabs and the removal of cess on many goods lowered the on\u2011road price of many models, prompting a surge in demand. ICRA data indicate that retail sales of vehicles reached 29\u202fmillion units in the 11 months ending August\u202f2026, a 20\u202fpercent increase over the same period a year earlier. The growth was broad\u2011based: passenger\u2011vehicle registrations rose 22\u202fpercent, two\u2011wheelers 20\u202fpercent, commercial vehicles 19\u202fpercent and tractors 23\u202fpercent.<\/p>\n<p>Jitin\u202fMakkar, senior vice\u2011president and group head of corporate ratings at ICRA, said the GST rate rationalisation \u201cdelivered a notable consumption sentiment boost\u201d over the past 11\u201112 months. The momentum was also reflected in manufacturer dispatches, according to data from market\u2011research firm Siam. Director\u2011general Rajesh\u202fMenon noted in August that \u201cthe broader demand environment remains fundamentally healthy,\u201d although he cautioned that the latest month&#8217;s growth was helped by a lower base in the prior year.<\/p>\n<p>Vehicle pricing illustrates both the immediate benefit of the tax cut and its later dilution. The Maruti Alto K10 STD (O) fell from Rs\u202f4.2\u202flakh to Rs\u202f3.7\u202flakh after the September\u202f2025 rate change and has held that level since. The Mahindra Scorpio\u2011N Z2 dropped from Rs\u202f13.9\u202flakh to Rs\u202f13.2\u202flakh, but its current price has risen to Rs\u202f13.6\u202flakh, reflecting upward pressure from raw\u2011material and logistics costs.<\/p>\n<h2>Mixed outcomes for FMCG, apparel and hospitality<\/h2>\n<p>Fast\u2011moving consumer goods saw a more nuanced picture. The GST on several essential items was cut to 5\u202fpercent from 12\u202fpercent or 18\u202fpercent, prompting an average price reduction of about 10\u202fpercent when the change took effect. However, companies have since lifted prices by 6\u20117\u202fpercent to offset higher raw\u2011material, energy and logistics expenses, including inflation linked to the West Asia conflict.<\/p>\n<p>Mayank\u202fShah, chief marketing officer at Parle Products, said consumers remain \u201cbetter off by 2\u20113\u202fpercent,\u201d but warned that another round of price hikes could be needed around Diwali if input\u2011cost inflation persists. Nestle India described the GST reduction as providing a \u201cpositive impetus to consumption,\u201d yet Ronak\u202fShah, a consumer\u2011sector analyst at Equirus Securities, argued that the reform delivered \u201cmore of an affordability boost than a direct demand surge.\u201d He added that the GST cut acted as a cushion against cost inflation rather than generating a substantial increase in category consumption. Premium and discretionary FMCG items did see incremental demand, but subsequent mid\u2011to\u2011high\u2011single\u2011digit price hikes diluted those gains.<\/p>\n<p>Apparel was largely left out of the relief. GST on clothing priced above Rs\u202f2,500 was raised from 12\u202fpercent to 18\u202fpercent, affecting festive and occasion wear. Rahul\u202fMehta, chief mentor at the Clothing Manufacturers Association of India, observed that the \u201cGST\u202f2.0 reforms or reductions have not really impacted prices to a great degree.\u201d He expects apparel costs to climb 8\u201110\u202fpercent this festive season, though consumer\u2011facing prices may increase by a lower 5\u20117\u202fpercent as manufacturers, brands and retailers absorb part of the burden.<\/p>\n<p>Hospitality experienced an unintended squeeze. Mid\u2011market hotels moved from a 12\u202fpercent GST rate with input\u2011tax credit to a 5\u202fpercent rate without the credit, meaning that while the headline tax rate fell, key inputs such as food, linen and utilities remained taxed at higher rates. The result has been a compression of margins for operators in that segment.<\/p>\n<p>Overall, the data suggest that the GST rationalisation succeeded in generating a short\u2011term lift in consumer sentiment, especially in price\u2011sensitive categories like automobiles. Yet the durability of that lift is being challenged by external cost pressures that have forced many firms to raise retail prices, thereby eroding the net benefit to shoppers.<\/p>\n<p>Analysts caution that if commodity\u2011price inflation continues, further adjustments\u2014either through additional GST tweaks or targeted subsidies\u2014may be required to preserve the purchasing power gains that the reform initially promised.<\/p>\n\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>A year after India&#8217;s GST rationalisation, rising commodity costs have trimmed the consumer price relief initially seen across automobiles, FMCG and other sectors.<\/p>\n","protected":false},"author":4,"featured_media":2104,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[299],"tags":[2236,2235,2237,2234,498],"class_list":["post-2103","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-automobile-sales","tag-commodity-prices","tag-fmcg","tag-gst-reform","tag-inflation","entry"],"_links":{"self":[{"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/posts\/2103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/comments?post=2103"}],"version-history":[{"count":0,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/posts\/2103\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/media\/2104"}],"wp:attachment":[{"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/media?parent=2103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/categories?post=2103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/newsraise.com\/in\/wp-json\/wp\/v2\/tags?post=2103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}