GST Reforms 2025: Key changes and what they mean for investors

India’s Goods and Services Tax (GST) system has undergone its biggest revamp since its launch in 2017. The government has cut rates on many essentials and daily-use items, expanded exemptions, and simplified compliance rules — changes aimed at helping both consumers and businesses.

The earlier four-slab system (5%, 12%, 18%, 28%) has been streamlined into a simpler three-tier structure: most goods and services are now taxed at 5% or 18%, while luxury and sin goods fall under a higher 40% slab. Several basics have also been moved to the 0% (nil) rate.

This simplification not only reduces complexity for businesses but may also lower the tax burden on households, resulting in higher disposable income and the potential for greater savings, investments, and overall economic growth.

Read on to find out more about what’s changed under the 2025 GST reforms and what investment opportunities it may open up.

Table of contents

• More money in people’s hands
• Why disposable income matters
• What it means for investors
• Consumption as an investment theme
• Bajaj Finserv Consumption Fund: An investment opportunity

More money in people’s hands

A key highlight of the September 2025 GST overhaul is the reduction of tax rates on essentials. Items such as food, healthcare, personal care, and home supplies have shifted from higher brackets to just 5%, while some basic items have even been exempted altogether.

Medical-grade supplies, packaged foods, and everyday goods have become more affordable, directly reducing household expenses. This relief means ordinary families are now able to spend less on necessities and keep more aside for future use. This could be savings, investments, or discretionary spending.

Here’s an overview of what has changed with the new reforms:

New GST Rates for Major Products (2025)

Source: GST Reforms 2025: Relief for Common Man, Boost for Businesses; Press Information Bureau

Why disposable income matters

When living costs fall, disposable income rises. For Indian households — particularly the middle class — this creates a chance to think beyond day-to-day expenses. Families can direct more money into savings and financial instruments.

Higher disposable income may encourage greater participation in insurance products and market-linked investment products such as mutual funds. This has the potential to create a multiplier effect: savings may generate investments; investments support businesses and businesses may create jobs and potential growth.

What it means for investors

For investors, the GST overhaul has several implications:

• Boost to consumption themes: Lower GST on FMCG, healthcare, and household goods can support demand, benefiting companies in these sectors.
• Financial product penetration: Exemptions on life and health insurance premiums may encourage higher insurance adoption, a positive for insurers and related funds.
• SME and rural demand: Lower GST on tractors, irrigation equipment, and handicrafts may strengthen rural markets, benefiting firms with rural exposure.
• Mutual fund strategies: Sectoral and thematic funds may capture specific opportunities, while broad market equity funds, debt funds or hybrid funds may help diversify and balance risk.
• Long-term growth signal: Simplification and lower compliance costs may improve business sentiment, creating a more conducive environment for investment across sectors.

Consumption as an investment theme

The GST reforms are also an attempt by policymakers to stimulate growth. Consumption accounts for more than 60% of India’s GDP (source: CEIC data), and by reducing GST on essentials and frequently used goods, the objective is to fuel domestic demand.

With many daily-use items — from food to personal care — now taxed at 0% or 5%, a significant share of household spending (roughly one-third for middle-income families) falls into lower tax brackets. This eases monthly budgets and leaves more room for savings or discretionary spending.

The GST reforms are also aimed at stimulating the country’s economic momentum. Lower input costs mean businesses can increase production, expand operations, and hire more workers. Sectors such as FMCG, healthcare, personal care, and retail, which are strong drivers of consumption, are positioned to potentially benefit.

While consumption-led sectors are in focus, other areas also show potential. Mutual funds targeting healthcare, insurance, and retail may see stronger participation.

For retail investors, thematic and sectoral funds provide convenient access to these trends. Those who prefer broader exposure can consider diversified equity funds, which balance risk while still capturing growth.

Please note that the reference to any industry/sector/stock is provided for illustrative purposes only. This should not be construed as a research report or a recommendation to buy or sell any security or sector.

Bajaj Finserv Consumption Fund: An investment opportunity

Investors who wish to participate in India’s evolving consumption story may consider the Bajaj Finserv Consumption Fund, an open-ended equity scheme that invests across multiple sectors likely to benefit directly or indirectly from domestic consumption and demand. The fund follows a megatrends-based approach, focusing on long-term shifts such as India’s demographic dividend, rising urbanisation, expanding e-commerce base, increasing FMCG penetration, growth in online food delivery, and demand in real estate and automobiles. By aligning portfolios with these structural consumption themes, the fund seeks to provide investors exposure to potential long-term growth opportunities.

Conclusion

The GST overhaul of September 2025 may mark a new chapter for India’s economy and households. By lowering taxes, expanding exemptions, and simplifying compliance, the government has increased disposable income while fueling investment opportunities. For households, this means newfound savings that can be channeled into long-term investments, while businesses benefit from a more efficient and growth-friendly tax regime.

Investors seeking to potentially tap into these growth opportunities may consider the Bajaj Finserv Consumption Fund. To know more about the scheme and for statutory details, click here.