GST rate cuts to boost Tamil Nadu economy: Sector-wise impact Explained

Chennai: In a significant development poised to reshape Tamil Nadu's economic landscape, the recent rationalisation of Goods and Services Tax (GST) rates is expected to deliver widespread benefits, from the state's iconic handloom weavers to its advanced automotive and electronics manufacturing hubs.

According to an analysis by the Press Information Bureau (PIB), the tax cuts, which lower rates to 5% or nil on a vast array of products, will reduce consumer prices by an estimated 6-11%. This strategic move is anticipated to enhance the competitiveness of Micro, Small, and Medium Enterprises (MSMEs), boost exports, and strengthen Tamil Nadu's position as a national industrial leader. The positive impact will traverse the entire state, touching millions of livelihoods in sectors as diverse as textiles, fisheries, food processing, and renewable energy.

GST 2.0 : Boosting Heritage Crafts and Rural Livelihoods

The state's renowned textile and handicraft sector, a cornerstone of its cultural identity and a massive employer, stands to gain profoundly. Tiruppur, celebrated as the 'Knitwear Capital of India' and supporting about 10 lakh workers, will see costs fall by 6-11% with the GST on low-value apparel reduced from 12% to 5%. This directly improves the margins for its 1,300-plus exporting units and strengthens their position in key international markets like the US and Europe.

Similarly, the globally famous Kanchipuram silk saree industry, which sustains thousands of family weavers and over 14,000 silk farmers, will benefit from a reduced tax on zari. This will lower the final price of a saree by 2-4%, making this GI-tagged product more accessible. The benefits extend to other GI-tagged products like Bhavani Jamakkalam rugs and Madurai Sungudi sarees, which will also become more affordable.

Beyond textiles, the food processing sector, critical to the rural economy, will see prices drop for biscuits, namkeens, and dairy products, providing consumer relief and supporting entities like the Aavin dairy cooperative. The famous Manapparai Murukku, a GI-tagged snack from Tiruchirappalli, will become about 6% cheaper, aiding some 500 small processing units.

GST Rate Reduction Expect to Empower Industry, Defence, and Green Energy

The GST rationalisation provides a substantial boost to Tamil Nadu's modern industrial base. The automobile sector, which employs a massive 22 lakh people and accounted for 40% of India's electric vehicle production in 2023, will benefit from GST on vehicles and parts being reduced from 28% to 18%. This reduction is expected to make automobiles more affordable and improve the cost-competitiveness of manufacturers and exporters.

The state's ambitious renewable energy sector, with a capacity of 34,700 MW, will also see project costs decrease by 6-7% due to lower taxes on devices and parts, accelerating progress toward green energy goals. Furthermore, the state's strategic defence and aerospace corridor, home to major facilities like the Heavy Vehicles Factory in Avadi and HAL units, will gain a significant edge. The slashing of GST on military hardware like missiles and transport aircraft to 0% will reduce costs by 18-28%, powerfully supporting the 'Atmanirbhar Bharat' (Self-Reliant India) initiative. The Integral Coach Factory in Chennai will also benefit from lower input costs, enhancing the efficiency of producing Vande Bharat and other rail coaches.

These sweeping reforms are set to strengthen rural incomes, improve MSME viability, and solidify Tamil Nadu's status as a premier investment destination, directly contributing to the national vision of 'Viksit Bharat 2047' (Developed India 2047).