Tax Reform and Household Welfare: The Impact of GST 2.0 on India’s FMCG Sector

Author(s)	Vipanshi Agarwal
Country	India
Abstract	This paper examines the impact of India’s GST 2.0 (Goods and Services Tax) reform on the Fast-Moving Consumer Goods (FMCG) sector, with a particular focus on consumer welfare, consumption patterns, and tax pass-through dynamics. Implemented in September 2025, GST 2.0 rationalised India’s indirect tax structure by consolidating multiple slabs into three primary rates: 5% for essential goods, 18% for standard goods, and 40% for luxury and sin goods. Given the FMCG sector’s high volume, low margins, and central role in household consumption, these changes have had direct implications for prices, affordability, and expenditure distribution across households. Using secondary data, policy documents, and a hypothetical consumption-basket analysis, this study evaluates both the benefits and limitations of GST 2.0. The findings suggest that while the reform improves affordability and equity for necessity-heavy consumption baskets, implementation frictions and incomplete pass-through limit its full consumer-welfare potential.
Keywords	GST 2.0, FMCG sector, tax rationalisation, consumer welfare, consumption patterns
Field	Sociology > Economics
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-12-31
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.64926

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