The recent Goods and Services Tax (GST) cut implemented by the Indian government has ignited an unprecedented surge in festival season shopping, pushing consumer spending to a record Rs 6 trillion ($67.6 billion) during the peak festive period from Navratri to Diwali in 2025. This major fiscal reform has not only boosted sales across diverse categories but also revitalized various sectors of the economy.

How GST Cuts Fueled the Festival Shopping Boom

On September 22, 2025, India’s government introduced sweeping GST rate reductions on nearly 400 product categories. This simplification created a new two-slab system of 5% and 18%, lowering the tax burden on many essential and festive goods. Categories moving from 12% or 18% GST to 5% included electronics, kitchen appliances, apparel, footwear, and vehicles with specific engine capacities. As a result, prices dropped significantly, encouraging consumers to spend more freely.

The timing of the GST cut, coinciding with the start of Navratri and building up to Diwali, India’s premier shopping festival, proved strategic. This period saw an 8.5% increase in spending compared to the prior year, illustrating pent-up demand that finally translated into strong consumption growth.[2][3][4]

Key Sectors and Products Driving Sales Growth

The festival shopping boom was broad-based, impacting multiple sectors:

• Automobiles: Leading carmakers such as Maruti Suzuki, Tata Motors, Mahindra & Mahindra, and Hyundai saw surging sales. Tata Motors alone delivered over 100,000 cars between Navratri and Dhanteras. Hyundai reported a 20% jump in sales on Dhanteras compared to last year. Mahindra also experienced a 27% rise in tractor sales, supported by a good monsoon that boosted rural incomes.[2][6]
• Electronics and Home Appliances: Reduced GST rates on products like air conditioners, TVs, and dishwashers encouraged high-volume festive buys, especially following the initial waiting period until customers adapted to the new rates.[1]
• Apparel and Footwear: Adjustments in GST slabs made goods priced up to Rs 2,500 subject to lower tax rates, stimulating sales in the mid-market apparel segment. Retailers noted renewed demand, particularly in the ₹1,000–₹2,500 price range, benefiting brands like Raymond and IKEA India.[1][3]
• Jewelry and Sweets: These remained popular, particularly on auspicious days like Dhanteras, further driving sector growth.[2]
• Furnishing and Household Goods: Strong traction was reported across multiple price segments as consumers balanced design preferences and affordability.[3]

Broader Economic Impact of GST Rate Reductions

The GST cuts have gone beyond boosting consumer spending by also fostering an improved credit environment and manufacturing demand. Banks such as Canara Bank reported over 25% growth in vehicle loans in Q2 2025, reflecting higher demand fueled by tax savings and improved consumer confidence. Loan demand in the MSME sector also grew 12.7%, driven by increased consumption and production requirements.[4]

Lower inflation, easing to 1.5% in September 2025—the lowest in over eight years—combined with tax relief and GST cuts has enhanced real income and purchasing power, providing households with more discretionary funds for festive shopping.[4]

Furthermore, the GST reform spurred a positive ripple effect in capital markets. The BSE Sensex and Nifty indices rose by over 4% during the early festival season, powered largely by investor optimism in the consumer goods, automobile, and real estate sectors.[5]

Challenges and Considerations

While the overall festive season sales were strong, certain segments faced challenges:

• Premium and branded apparel priced above ₹2,500 attracted a higher 18% GST, somewhat dampening demand in the luxury segment.
• Some analysts expressed caution on whether the short-term spike would sustain beyond the festival season, although government officials anticipate continued momentum in consumption.[1][3]

Looking Ahead: Sustaining Consumption Growth

The government’s strategy to reduce GST during the festive season provides a blueprint for stimulating consumption in a structurally sound manner. By easing tax rates o