GST 2.0 in India: What It Means for Startups and SMEs This Festive Season
Taxation reforms have always been one of the most significant levers for shaping India’s economic growth story. When the Goods and Services Tax (GST) was introduced in 2017, it was hailed as a “one nation, one tax” system that would simplify compliance, remove cascading taxes, and integrate India into a unified market. However, over the years, the multiple tax slabs—5%, 12%, 18%, and 28%—created complexity for businesses, especially for startups and small and medium enterprises (SMEs) that often struggled to balance compliance requirements with growth ambitions.
Now, with the government’s announcement of GST 2.0 in September 2025, India is entering the next phase of tax reform. This move is particularly significant for startups and SMEs, who are navigating competitive markets, rising costs, and evolving consumer expectations. The festive season, traditionally a peak period for consumption in India, further amplifies the importance of understanding how GST 2.0 will influence both demand and supply dynamics.
This blog explores the key features of GST 2.0, its implications for startups and SMEs, and why this is the right moment to leverage ThinkSurvey’s market research and business consulting services to stay ahead of the curve.
GST 2.0: The Key Reforms
- Simplified Tax Slabs
- The previous four slabs (5%, 12%, 18%, and 28%) have been rationalised into two primary slabs: 5% and 18%.
- A separate 40% slab has been created for luxury and “sin” goods, such as high-end cars, tobacco, and alcohol.
- Wider Coverage of Essentials at Lower Rates
- Everyday essentials like ghee, butter, paneer, snacks, coffee, jams, and even medicines have seen tax reductions, making them more affordable for consumers.
- Everyday essentials like ghee, butter, paneer, snacks, coffee, jams, and even medicines have seen tax reductions, making them more affordable for consumers.
- Electronics and Consumer Durables Become Cheaper
- Products like televisions, refrigerators, and air conditioners that were previously taxed at 28% are now within the 18% slab.
- Products like televisions, refrigerators, and air conditioners that were previously taxed at 28% are now within the 18% slab.
- Luxury Items Retain High Taxation
- High-value clothing, premium products, and luxury goods remain within the high tax category to balance revenue generation.
- High-value clothing, premium products, and luxury goods remain within the high tax category to balance revenue generation.
- Effective Date
- The reforms took effect on 22 September 2025, aligning with the start of the Navratri festive season—a deliberate move to stimulate consumer spending.
Implications of GST 2.0 for Startups and SMEs
The honourable Primer Minister of India, hailed GST 2.0 reforms as it will accelerate growth and bring happiness to every family. But what does this mean for Indian business owners:
1. Increased Consumer Spending Power
The reduction of GST rates on essentials and popular consumer products directly translates into increased disposable income. For startups and SMEs, this means greater demand for affordable products and services, particularly in consumer-facing industries like food & beverage, retail, healthcare, and electronics.
2. Competitive Pricing Opportunities
With the new tax slabs, businesses have the opportunity to revisit their pricing strategies. SMEs can now position their products more competitively without sacrificing margins. For example:
- A packaged food startup can pass on the benefits of reduced GST to price-sensitive customers.
- An electronics SME can reprice its inventory more attractively to drive sales during festive promotions.
3. Better Margins and Reinvestment Potential
The rationalisation of slabs reduces the tax burden for certain categories. SMEs can redirect these savings towards marketing, innovation, or scaling operations, rather than struggling with high indirect taxes.
4. Changing Consumer Behaviour
Whenever tax policies shift, consumer behaviour adapts. The affordability of previously expensive items, such as electronics, means startups in adjacent sectors (e.g., fintech offering consumer loans, digital-first retail platforms) need to reassess market segments they target. Understanding these shifts through data becomes critical.
5. Compliance Simplification
For many small businesses, one of the biggest challenges of GST 1.0 was managing multiple slabs. GST 2.0 reduces this complexity, making compliance easier and freeing up resources for business growth rather than paperwork.
6. Uneven Impact Across Sectors
Not all startups and SMEs will benefit equally. For example, textile businesses dealing in high-value clothing now face a higher rate (18% instead of 12%). Understanding these sector-specific nuances is vital for SMEs to adjust strategy.
Why Market Research Is Critical Post-GST 2.0
The success of any startup or SME post-reform depends on how well it adapts to new demand patterns. Policy reforms rarely impact all sectors uniformly, and GST 2.0 is no exception.
Here’s why market research is indispensable:
1. Identifying Shifts in Demand
With ease in taxes, business owners should now avoid guess work to match the changes in consumer expectations, in terms of:
- Which product categories are consumers now prioritising?
- Are customers trading up to better quality products now that they’re more affordable?
Live Example: This millet-based food café owner conducted a national level study to uncover what drives frequent millet consumption and what barriers prevent wider adoption. The findings and insights guided the creation of a dedicated millet-based menu for their customers.
2. Understanding Price Elasticity
As the prices of the daily used products are expected to lower down, it has created a new puzzle for business owners on:
- How much price reduction is required to boost sales volume?
- Should startups absorb GST benefits fully or partially while pricing their products?
Live Example: This eco-friendly product start-up consultant surveyed more than 1000 Indian citizens from across 60+ cities to understand their eagerness towards eco-friendly green products. And how much would they be willing to spend.
3. Targeting the Right Customer Segments
As the festivals are approaching, ease in tax deductions has also created a shift in the consumers’ priorities. Market research helps business owners answer crucial questions like:
- Which demographics are most influenced by lower GST on essentials?
- Are urban millennials more inclined to purchase electronics/fashion products now, while rural consumers focus on food items?
Live Example: The Mumbai-based fashion brand SOEZI, targeting female population of India, conducted a national level market survey to understand their target personas. Backed by the research, analysis and insights provided by ThinkSurvey, the beauty brand launched a wide range of artificial nails.
4. Competitor Benchmarking
While some startups and SME owners are still evaluating and discussing to even think about the market shift due to GST 2.0 in India. Your competitive brands are already making efforts to take right decisions. Market Research helps you answer:
- How are established players adjusting their pricing and marketing strategies?
- What opportunities exist for SMEs to differentiate themselves?
5. Validating Business Ideas
For startups exploring new markets, GST 2.0 creates a unique moment to test product-market fit with real-time surveys and pilot campaigns.
New Norm Foods, that is reimagining everyday dairy with plan-based alternatives for health-conscious and eco-aware consumers, did exactly that. But launching into a young market wasn’t simple — they needed to validate consumer interest, test pricing, and understand adoption barriers. That’s where ThinkSurvey stepped in to assess if their concept was truly market-ready.
How ThinkSurvey Can Help Startups and SMEs in the GST 2.0 Era
At ThinkSurvey, we understand that policy reforms like GST 2.0 are not just economic events—they are opportunities for business transformation. Our suite of services is designed to help startups and SMEs translate these changes into actionable strategies.
1. Market Research Surveys
- Conduct targeted surveys to capture consumer sentiment post-GST reforms.
- Understand what festive shoppers are prioritising and how their budgets are shifting.
2. Business Consulting Services
- Get expert guidance on revising pricing models, optimizing supply chains, and repositioning offerings in line with GST 2.0.
- Identify growth strategies that align with reduced tax burdens.
3. Data Collection for Startup Market Validation
- For founders exploring new ideas, ThinkSurvey can run large-scale, reliable data collection exercises to validate business concepts in the GST 2.0 environment.
4. User-Generated Content Campaigns
- Leverage authentic customer voices to promote your brand. With increased festive consumption, UGC can amplify trust and drive conversions more effectively than traditional advertising.
5. SME-Focused Festive Campaigns
- Design campaigns that capture consumer attention during the peak spending season.
- Blend insights from GST-driven pricing changes with cultural relevance to maximise impact.
Why the Festive Season 2025 Is a Unique Opportunity
The festive season is always a time of heightened consumer spending in India, but this year is special:
- GST 2.0 has lowered prices across essentials and popular categories.
- Navratri to Diwali traditionally sees a surge in purchases of food, clothing, electronics, and home goods.
- Consumers are more optimistic with greater affordability and confidence in the economy.
For startups and SMEs, this means:
- A chance to capture new customers entering the market.
- An opportunity to increase average order value (AOV) by bundling affordable products with aspirational ones.
- The possibility of long-term loyalty if businesses position themselves effectively during this high-visibility season.
Final Thoughts
GST 2.0 is not just a tax reform—it is a business opportunity. For startups and SMEs in India, the rationalisation of tax slabs, reduction in consumer prices, and simplification of compliance create the perfect environment for growth. But success will depend on understanding consumer shifts, adapting pricing strategies, and running effective campaigns.
This is where ThinkSurvey comes in. Whether it’s through market research, consulting, data collection, or user-generated content campaigns, we empower startups and SMEs to make informed decisions and seize opportunities.
As the festive season unfolds, businesses that act quickly and strategically will gain the most. With GST 2.0 setting the stage for higher demand, now is the time to validate your ideas, refine your strategies, and connect with your audience.
👉 Partner with ThinkSurvey this festive season to ensure you not only participate in the GST 2.0 wave but lead it. Connect with our Team.
