India's GST cuts to lift festive e-commerce sales by up to 20%: Executives

India's GST overhaul is expected to drive festive e-commerce sales higher by 15-20% in electronics and other categories, as lower tax rates put more money in consumers' hands

India’s recent goods and services tax (GST) cuts are expected to boost e-commerce sales by 15–20 per cent in high-value categories such as electronics, according to industry executives, as the government’s tax rationalisation encourages consumer spending ahead of the festive shopping season.

 

E-commerce and quick-commerce companies are anticipating an additional surge in demand on top of already strong festive season projections. Executives said the tax reforms could create a “multiplier effect” across consumer categories ranging from fast-moving consumer goods to local manufacturing.

 

The GST restructuring, implemented by Prime Minister Narendra Modi’s government, is aimed at spurring domestic consumption and reducing India’s dependence on global trade fluctuations as part of the country’s self-reliance strategy, industry leaders said.

 

“GST rationalisation will put more money in consumers’ hands, lifting festive sentiment and driving growth across sectors,” said Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart Group.

 

Divya Bhushan, Tax Partner, EY India, said the proposal to transition from the current four-tier GST structure to a simplified two-slab system of 5 per cent and 18 per cent for ‘merit’ and ‘standard’ goods, along with a 40 per cent special rate for select items, holds significant promise for the e-commerce and quick-commerce sectors. 

 

“By easing the tax burden on essential goods, these reforms will lower prices for consumers and enhance the competitiveness of online platforms,” Bhushan explained.

 

She added that the streamlined classification could help mitigate disputes and reduce compliance complexities. “Overall, once implemented, we can anticipate a surge in consumer spending, which will drive further expansion in the e-commerce and quick-commerce ecosystem,” Bhushan said.

 

Achal Chawla, Indirect Tax Partner, Consumer Products and Retail at EY India, said the GST reforms would boost consumption and enhance the spending power of customers, which would also reflect on quick-commerce platforms.

 

“The government is bringing the rates down for major consumable items. Those taxed at 12 per cent today will now be shifted to 5 per cent. It will have an impact as daily items will be cheaper, people will have more money to spend, and make discretionary purchases,” Chawla said. “With the festive season in, quick-commerce companies will also see higher orders and more volume, which will impact their revenue.”

 

Chawla added that quick-commerce companies may need to update their systems or enhance backend readiness to accommodate the revised rates.

 

Business Standard wrote to Blinkit, Swiggy Instamart, and Zepto, but the queries did not elicit any response.

 

India is preparing its most significant overhaul of the GST since its launch in 2017. Prime Minister Modi recently signalled that a “next-generation” GST reform could be rolled out by Diwali, aiming to simplify rates and resolve long-standing disputes.

 

The proposal would replace the current four-tier system with two primary rates: 5 per cent for essentials and 18 per cent for most other goods. Luxury and sin goods could face a 40 per cent levy. Relief measures under consideration include cutting GST on small petrol and diesel cars to 18 per cent from 28 per cent, and reducing or eliminating GST on life and health insurance premiums.

 

The GST Council will take up the recommendations in the coming weeks.