A year after India’s sweeping GST rationalisation, rising commodity prices have eaten into a large share of the gains, leaving the landmark tax reform with mixed outcomes across sectors.

Prices of several products, from food items to consumer goods and automobiles, have slowly inched up over the past year, diluting the relief that lower tax rates were meant to deliver. While consumers initially paid less and demand picked up quickly, higher input costs have steadily clawed back part of the savings.

Automobiles emerge as the clear winner

The automobile sector has been the standout beneficiary of the rejig. Automobile retail sales touched 29 million units during the 11 months ended August 2026, rising 20 per cent from a year earlier, according to data from ratings agency ICRA.

Passenger vehicle registrations grew 22 per cent, two-wheelers rose 20 per cent, commercial vehicles climbed 19 per cent and tractors surged 23 per cent. With some slabs and the cess on most goods removed, buyers moved quickly and sales touched new highs.

Jitin Makkar, senior vice-president and group head for corporate ratings at ICRA, noted that assessed over the past 11 to 12 months, the GST rate rationalisation delivered a notable consumption sentiment boost.

Commodity costs claw back the savings

The picture is less rosy elsewhere. Raw material, packaging and logistics costs have risen through the year, and companies have passed on at least part of that burden to consumers through higher shelf prices.

The result is a slow upward drift in prices across food, daily-use goods and durables, the very segments where rate cuts were expected to keep a firm lid on prices. For households, the tax saving printed on the bill is increasingly offset by higher base prices.

Smaller businesses and traders have felt the squeeze more acutely, caught between rising procurement costs and customers who still expect the lower post-reform prices they were promised a year ago.

What the next year may hold

Analysts say the reform’s full promise will depend on input costs cooling down. If commodity prices stabilise, the leaner rate structure could finally deliver its intended relief to consumers in full.

The momentum in manufacturer dispatches over the last six months suggests the broader demand environment remains fundamentally healthy. For now, the lesson of the first year is clear: tax reform can lift demand, but holding on to those gains needs stable costs across the supply chain.