GST 2.0 reforms to fuel a 15–20% surge in festive AdEx across key categories

The rollout of India's simplified GST 2.0 regime starting from September 22, 2025, has created a ripple effect across the advertising ecosystem, with brands across multiple categories expected to recalibrate their marketing strategies. The government's decision to consolidate four existing GST slabs of 5%, 12%, 18%, and 28% into primarily two rates, 5% and 18%, is expected to drive significant changes in advertising expenditure patterns during the crucial festive season.

Industry leaders indicate that this tax restructuring will have an immediate and substantial impact on marketing budgets. Deepak H, Partner at Ipsos Strategy3, projects, “Brands, especially in FMCG, automobiles, electronics, and e-commerce sectors, are expected to ramp up their advertising budgets by 15-20%, focusing heavily on digital and festive campaigns." 

This is driven by improved consumer affordability and enhanced business margins. In contrast, tax rates on advertising remain unchanged. Digital advertising across online, mobile, and social platforms will continue to attract 18% GST, while print advertising in newspapers and magazines stays at 5%. The expected increase comes from consumer demand rather than advertising services. 

The timing of these reforms, coinciding with India's peak festive shopping period, presents an opportunity for brands to capitalise on improved consumer sentiment and increased disposable income. 

FMCG and consumer staples lead the charge 

The fast-moving consumer goods sector emerges as the biggest beneficiary of the GST rationalisation, with multiple product categories experiencing substantial tax relief. With essentials like milk, paneer, rice, and medicines now falling under the 5% bracket, and consumer durables, packaged foods, and electronics largely taxed at 18% instead of the previous 28%, households are expected to have more spending power for discretionary purchases.

The chocolate and confectionery segment illustrates this, with Mars Wrigley India's General Manager, Ahmed Abdel Wahab, noting how the company welcomes the GST Council's decision to move chocolates and other FMCG products to the 5% tax slab. This reduction in finished goods taxation, combined with lower input costs as raw materials also benefit from reduced GST rates, creates a compelling scenario for FMCG brands to increase their advertising investments.

Wahab emphasises, “This forward-looking reform comes at an ideal time during this festive season, helping make everyday treats more affordable for consumers preparing to celebrate." The dual benefit of reduced taxation at both input and output levels enables manufacturers to respond with enhanced product offerings and expanded market reach. 

The packaged foods segment, which has moved from higher tax slabs to the 18% bracket, is expected to see renewed advertising activity as brands attempt to communicate better value propositions to consumers. 

This category's advertising expenditure is likely to focus on digital platforms and traditional media during the festive season, as companies aim to capture the increased consumer appetite for convenient, branded food options.

However, a 40% slab has been reserved for bigger cars, tobacco, and aerated drinks. This marks the government’s effort to simplify compliance while targeting high-end consumption. However, the GST rate on all electric vehicles will remain unchanged at 5%.

Consumer electronics & footwear position for market expansion

The consumer electronics and home appliances sector represents another significant beneficiary of the GST restructuring, with most products in this category moving from the 28% bracket to 18%. Prashant Puri, Co-Founder & CEO, AdLift, notes that other than FMCG, “mass categories like consumer durables, and mid-segment automobiles will see new headroom to expand outreach.”

According to him, we could see a sharper-than-usual spike in AdEx given the timing aligning with the festive season.

This reduction in tax burden creates a dual opportunity for brands: improved affordability for consumers and enhanced margins that can be reinvested into marketing activities.

Television manufacturers and smart device companies are particularly well-positioned to benefit from this change. Lower taxes on televisions and smart devices are expected to accelerate digital adoption, potentially expanding the audience base for advertisers while simultaneously creating new advertising inventory through connected TV and smart device platforms.

A recent festive shopper report by MiQ notes that half of India’s festive shoppers (43%) plan to spend more than Rs 20,000 this season. Brands are more than likely to benefit from the cuts. 

The home appliances segment, which includes everything from refrigerators to washing machines, is likely to see intensified advertising competition as brands vie for market share in what becomes a more accessible price category. The advertising strategy could emphasise financing options, extended warranties, and festive offers that make premium appliances more attainable for middle-class households.

Another beneficiary, the footwear industry, is positioned to capitalise on both improved affordability and competitive advantages over unorganised markets. Paragon Footwear's CMO Shawn Chandy expressed, “This move will make quality footwear more affordable for the common man and the middle class while also giving a strong boost to domestic demand."

The reduction in GST on footwear particularly benefits the organised sector, which has historically faced challenges competing with unorganised players who often evade taxes. Candy noted that the reduction provides timely relief for organised players and creates the opportunity to expand production, generate more jobs, and support India’s vision of inclusive growth.

However, the apparel segment faces a contrasting scenario with GST increasing from 12% to 18% on clothing accessories costing more than ₹2,500. This change could impact global fashion brands operating in the premium segment, potentially requiring them to adjust their marketing strategies to address the higher price points or focus on value communication to maintain market share.

Digital advertising and performance marketing capture increased investments

While the advertising industry itself remains largely unchanged in terms of tax structure, the sector is experiencing a significant demand surge as brands across categories increase their marketing investments.

Puri characterised the GST overhaul as "a landmark reset for India's consumption and advertising story," noting that the simplified compliance structure injects fresh consumer confidence. 

The digital advertising ecosystem is particularly well-positioned to capture this increased investment. He highlighted that as brands redeploy their tax savings, "measurable, ROI-driven channels like performance marketing, video, and influencer campaigns will likely capture the lion's share of spend." 

As per Qoruz’s Festive Season Report, brands are expected to spend more than ₹700 crore on influencer marketing during the 2025 festive season. Consumer durables are expected to be the highest spending sector this season. This is followed by fashion and beauty, FMCG, and e-commerce. 

Additionally, regional content is expected to generate 30% higher engagement than English content, with participation from Tier II and Tier III markets expected to drive the increase in spending.

The simplification of GST compliance also benefits small and medium enterprises (SMEs) and regional brands, who may find it easier to formalise operations and invest in marketing. 

Hospitality and services navigate complex changes

The hospitality sector faces a nuanced impact from the GST reforms, with hotels experiencing both benefits and challenges. The reduction of tax on hotel rooms priced up to ₹7,500 per night from 12% with input tax credit to 5% without ITC makes mid-market accommodations more affordable for consumers while requiring hotels to absorb upstream taxes without set-offs.

Ambuja Neotia Group's Chairman Harshavardhan Neotia acknowledged that while the absence of input tax credit requires hotels to absorb upstream tax without set-offs, "the path forward lies in a combination of thoughtful pricing, operational efficiency, and cross-sector synergies." This suggests that hospitality brands will need to optimise their advertising strategies to communicate value while managing cost pressures.

The improved affordability of mid-market hotel rooms is expected to stimulate domestic travel, creating opportunities for hospitality brands to increase their advertising investments in regional markets and target domestic tourism segments. This could lead to increased advertising expenditure on digital platforms and regional media that effectively reach potential domestic travellers.

Long-term impact 

The sustainability of increased advertising expenditure depends largely on whether the GST reforms generate lasting improvements in consumer purchasing power and business confidence. The reforms create particular opportunities for brands to expand their reach into Tier II and III markets, where improved affordability makes branded products more accessible to new consumer segments. This geographic expansion of target markets is likely to drive sustained increases in advertising expenditure as brands invest in regional media, local language content, and market-specific campaigns.

As the Indian economy adapts to the GST 2.0 framework, the convergence of improved consumer affordability, enhanced business margins, and simplified compliance creates a favourable environment for sustained growth in advertising expenditure, extending the benefits well beyond the current festive season.