India’s biggest overhaul of the Goods and Services Tax (GST) since the 2017 rollout has reset the playing field for businesses, from traditional FMCG giants to emerging D2C brands.

At its 56th meeting this week, the GST council, chaired by finance minister Nirmala Sitharaman, cut down the four-tier structure (5%, 12%, 18%, 28%) down to two slabs, while introducing a steep 40% bracket for select luxury and sin goods.

Of the 453 goods that saw revised rates, 413 became cheaper, with essentials taking centre stage, with nearly 295 products earlier taxed at 12% now falling into the 5% or nil bracket. Economists expect the move to spur consumption and ease core inflation.

Soumya Kanti Ghosh, group chief economic advisor at State Bank of India, estimates Consumer Price Index (CPI) inflation could decline 25-30 bps in FY26, assuming a 60% pass-through of the savings on food.

So, on the D2C and retail front, the question is to what extent companies will pass on the savings. For D2C startups and retail brands, this reform is less about rate cuts and more about competitive positioning.

Lower taxes on essentials may widen their share of the consumer wallet, but they also sharpen the pricing edge of established FMCG players with scale.

The critical question now is not whether GST will lower inflation, but whether consumers will actually see meaningful price drops on shelves and how young D2C brands can leverage this window to strengthen their market share.

D2C Brands To See Price Cuts

First things first, will the end users actually see a price drop? The answer is yes. Founders and financial advisors, Inc42 spoke to say that lower MRPs are inevitable, with changes expected to roll out in phases once the GST reforms take effect on September 22, 2025.

Brands will have to ensure compliance with the GST law’s anti-profiteering provisions, which strictly mandate that any benefit from the reduced tax must be passed on to consumers, with penalties for non-compliance.

FMCG giants, including HUL, P&G, Nestle India have been penalised in the past.

Besides, consumers will naturally gravitate towards........

© Inc42