India’s festive season has always been more than just a time for celebration—it’s also the heartbeat of the country’s economy. From sweets and clothing to cars and gold, spending surges across industries during Navratri, Diwali, and Christmas. With the introduction of GST 2.0 in 2025, the government has made sweeping changes to the tax structure that could further fuel this seasonal consumption wave.
Let’s look at how GST 2.0 reforms could directly impact festive season spending.
What is GST 2.0?
GST 2.0 is the government’s second-generation tax reform, aimed at reducing complexity and making the tax system more growth-friendly.
Key highlights include:
- Fewer Tax Slabs: The old system of 0%, 5%, 12%, 18%, and 28% slabs has been simplified. Now, there are mainly three:
- Nil / 5%: Essentials and items of daily consumption.
- 18%: Majority of goods and services (standard rate).
- 40%: Luxury and sin goods (cars, tobacco, alcohol, premium gadgets).
- Relief for Consumers: Life insurance, health insurance, and certain food categories are now tax-free.
- Compliance Simplification: Streamlined digital filing and reduced paperwork, especially benefiting SMEs and retailers.
This reform comes at a time when consumer sentiment is recovering, and businesses are gearing up for their biggest sales season of the year.
Why GST 2.0 Matters for Festive Spending
1. Lower Prices on Essentials and Popular Festive Items
- Items like sweets, packaged food, edible oil, and festive decorations now fall under the Nil or 5% tax slab, compared to higher rates earlier.
- Example: A box of festive mithai that earlier attracted 12% GST is now in the 5% category, making it cheaper. Over bulk festive purchases, families save significantly.
- Apparel under ₹1,000, mid-range electronics, and household goods are also cheaper, encouraging families to spend more freely.
Impact: With prices reduced at the consumer’s end, festive shopping baskets are expected to be larger this year.
2. Boost to Middle-Class Consumption
- India’s middle class forms the largest consumer group during festivals, often making aspirational purchases.
- With GST 2.0, durables and lifestyle products (smartphones, TVs, refrigerators, two-wheelers) are more affordable in the 18% slab, down from 28% in some categories earlier.
- Example: A mid-range two-wheeler costing ₹90,000 earlier with 28% GST (₹25,200 tax) now falls under 18% (₹16,200 tax), saving nearly ₹9,000 for the buyer.
Impact: These savings act as a direct incentive, pushing families to upgrade or purchase new goods during the festive period.
3. Insurance & Financial Products as Gifts
- A unique feature of GST 2.0 is the removal of GST from life and health insurance.
- Earlier, premiums attracted 18% GST, making policies costlier for families.
- With nil GST, a health insurance premium of ₹20,000 saves families ₹3,600 annually.
Festive Relevance:
- Insurance policies are emerging as meaningful festive gifts, combining protection with tradition.
- Families may now opt for insurance as Diwali gifts, alongside gold coins and electronics.
4. Retail and E-commerce Bonanza
- Retailers and online platforms are expected to pass on GST benefits through festive sales.
- E-commerce platforms like Amazon and Flipkart already plan mega-sale events, with further discounts possible due to tax savings.
- Example: A laptop previously priced at ₹60,000 with 28% GST is now under 18%. The direct reduction plus festive offers makes it highly attractive.
Impact: Increased online orders, bulk buying, and higher competition among platforms ensure customers enjoy bigger savings, boosting overall spending.
5. Luxury Buyers Still Spending Big
- Luxury cars, premium gadgets, and sin goods (alcohol, tobacco) are now in the 40% slab, up from 28%.
- This makes them costlier, but the premium buyer segment is not price-sensitive.
- Example: A ₹50 lakh luxury SUV may now cost 10–12 lakh more due to higher GST, but affluent buyers are unlikely to cancel purchases during Diwali.
Impact: While mainstream buyers benefit from tax cuts, luxury buyers will continue spending, ensuring high-value transactions for businesses.
6. Gold & Jewellery Purchases Become More Attractive
- Traditionally, gold and jewellery are must-buy items during Dhanteras and Diwali.
- Under GST 2.0, the tax on gold jewellery has been rationalized (earlier 3% + making charges confusion, now streamlined).
- Buyers save not just on jewellery but also on hidden costs like making charges, which now fall under lower slabs.
Impact: Families and investors are expected to purchase more gold during the festive season, giving a strong push to the jewellery industry.
7. Travel & Hospitality Get a Festive Boost
- During Navratri, Diwali, and Christmas, families often travel for vacations or visit relatives.
- GST on hotel stays, travel packages, and restaurants has been rationalized into a simpler slab (mostly 18%).
- Example: A ₹50,000 holiday package earlier taxed at 28% (₹14,000 GST) now costs only ₹9,000 in GST — a saving of ₹5,000.
Impact: With travel becoming more affordable, domestic tourism and festive dining are expected to rise.
8. Home Renovation & Real Estate Demand
- Many households renovate or upgrade homes during the festive season.
- GST 2.0 has rationalized taxes on construction materials like cement, paints, and furniture.
- Example: Cement (earlier 28% GST) now attracts 18%, significantly reducing building/renovation costs.
Impact: This encourages home improvements and boosts real estate-related spending in the festive season.
9. MSME & Local Artisan Products Become Competitive
- Small businesses and local artisans (who supply handicrafts, diyas, clothing, festive décor) often struggled with GST compliance.
- GST 2.0 introduces simplified filing and threshold exemptions, making it easier for them to operate without excessive tax burden.
- Products crafted by local sellers are now more affordable and competitive with mass-produced items.
Impact: Consumers are more likely to buy from local shops and artisans, boosting MSME revenues during the festive rush.
10. Electronics & Gadgets Fuel the “Gifting Economy”
- Gadgets like smartphones, smartwatches, tablets, and appliances dominate Diwali gifting.
- With GST on most electronics falling under the 18% slab, their effective price is lower compared to pre-GST 2.0.
- Example: A smartphone earlier taxed at 28% now at 18% could be cheaper by several thousand rupees.
Impact: Tech gifting is set to boom, with families and corporates buying in bulk, pushing up sales volumes for electronics retailers.
Impact on Businesses
- Retailers & SMEs: Lower rates mean higher sales volumes. Small shops selling festive items like sweets, clothing, and decorations will see bigger footfall.
- E-commerce: Lower product prices + simplified compliance = record-breaking festive orders.
- Automobiles: Mass-market two-wheelers and cars will see strong demand. Luxury may face some slowdown due to the 40% slab, but demand remains resilient.
- FMCG & Food: With essentials at lower or nil GST, gifting hampers and festive food products will be more affordable, boosting bulk sales.
Conclusion
The launch of GST 2.0 has come at just the right time, with India gearing up for its most vibrant shopping period of the year. By simplifying tax slabs, reducing the burden on essentials, and streamlining compliance, the reform directly boosts consumer confidence and purchasing power.
From affordable sweets and clothing to cheaper electronics, lower insurance costs, and competitive travel packages, GST 2.0 ensures that festive spending becomes more rewarding for consumers and more profitable for businesses. Even sectors like gold, real estate, and local artisans stand to benefit, creating a ripple effect across the economy.
