India GST rate cuts offset by rising commodity prices

While the GST rate reductions implemented in September 2025 were intended to provide consumer relief by simplifying the tax structure, the impact on product prices has been partially offset by rising raw material and commodity costs.

Initially, the tax cuts led to visible price drops in sectors such as automobiles, including cars, two-wheelers, and air conditioners. Data from ICRA indicates a significant surge in vehicle sales during the 11 months leading up to August 2026, with a 20 percent overall increase compared to the previous year. Specifically, passenger car registrations rose by 22 percent, two-wheelers by 20 percent, commercial vehicles by 19 percent, and tractor sales by 23 percent.

However, as manufacturing costs increased due to higher input prices, companies that initially absorbed these costs to protect consumers have begun passing them on through higher retail prices. This trend is gradually eroding the initial price relief provided by the GST adjustments.