GST Cuts: Relief or Just a Temporary Fix?
A recent survey reveals that almost 40% of Indian consumers were struggling to manage their expenses beyond food items earlier this year. With the Goods and Services Tax (GST) cuts announced by the GST Council, there is hope for relief. However, a report from PwC India highlights ongoing financial strain among shoppers. The report indicates that many individuals are grappling with rising debts and decreasing savings, affecting their ability to spend.
The PwC India’s Voice of the Consumer 2025 report states that 32% of respondents are merely ‘financially coping’, while another 7% are ‘financially insecure’. This financial crunch is evident as households face increased liabilities compared to four years ago. Hitanshu Gandhi from PwC India mentions that a significant portion of UPI payments is going towards debt repayment, indicating stress on household finances.
According to the National Payments Corporation of India (NPCI), approximately Rs 3.5 lakh crore, or 13% of total UPI payments in the first four months of 2025-26, was for debt collection agencies. While 60% of respondents feel financially secure, many express that after paying bills, little remains for leisure activities. This situation underlines the need for better financial management and consumer behavior adjustments.
The report suggests that the GST rate cuts can help make household budgets more manageable. However, consumers are adopting new shopping habits, including exploring different stores for better deals. PwC officials are uncertain about how much the tax-induced price reductions will stimulate consumption. Some consumers may choose to spend savings on better electronics or dining out rather than essentials.
Furthermore, the GST cuts are expected to increase demand for goods from the formal sector. As consumers seek trust and quality, the formalization of brands is likely to grow. This trend is evident in industries like beauty and personal care, where numerous branded players are emerging. Quality consumption is increasingly becoming a priority for consumers.
For instance, the consumption of basmati rice has shifted from special occasions to a staple in daily meals. Economists believe the GST rate cuts could enhance India’s GDP growth by up to 60 basis points and lower retail inflation by nearly 100 basis points over the year. However, the question remains: how much of the tax reduction will translate into lower consumer prices?
