GST cuts expected to give Rs 30,000 crore boost to Uttar Pradesh economy

Uttar Pradesh, the country’s largest consumer market, is expected to be among the biggest beneficiaries of the Centre’s move to simplify GST into two slabs. The reforms, which include a 10 percent cut in GST on cement and the removal of tax from insurance premiums, are set to benefit consumers directly while also fuelling long-term industrial growth.

Officials estimate an initial revenue shortfall of around Rs 3,500 crore for the state, but the long-term gain is projected at Rs 30,000 crore. “Initially, we may feel a pinch, but in the long term, the state will be a beneficiary of this GST reform,” UP Finance Minister Suresh Khanna said.

The biggest relief comes in healthcare. With GST on health and life insurance premiums reduced from 18 percent to zero, around 90 lakh more people are expected to come under insurance coverage. “Insurance companies anticipate issuing an additional 50 lakh policies in the state by March, significantly expanding the scope of cashless treatment in hospitals,” said Jasvinder Singh Bhatia, Insurance Consultant, based in Lucknow. “The number of people will now opt for health insurance and zero GST is a big relief for the common people,” he said.

Besides, the decision to simplify GST is also expected to generate growth of 20 percent in the pharma and healthcare sectors, with 27 allied fields likely to grow by 10 to 15 percent. The proposed pharma park in Lalitpur is expected to gain fresh momentum.

Dr Upasana Arora, Chairperson of CII UP, Chair of UP Health Summit 2025 and MD of Yashoda Super Speciality Hospitals Pvt Ltd, said, “The recent revision in GST rates will have a positive impact on the economy, particularly on demand growth and supply chain systems. Removing GST from health and life insurance premiums will help bring more people under the umbrella of medical security.”

In the construction sector, cement prices are expected to drop by around 8 percent following the tax cut. This will bring down the cost of building homes and ease expenses for middle-class families, while freeing up funds for infrastructure development. “Cement is not a luxury item but a basic product linked to development. Lower GST will reduce rates and expand the scope of growth,” said an office-bearer of CREDAI.

CREDAI, Confederation of Real Estate Developers' Associations of India, is the apex body of private real estate developers in India

Vehicle buyers in Uttar Pradesh are also set to benefit. Auto dealers estimate two-wheelers could become cheaper by Rs 10,000 to Rs 20,000 and cars by up to Rs 50,000. During the upcoming festive season, the state could witness an additional 40,000 vehicle purchases.

Abhishek Sarraf, Vice Chairperson of CII Uttar Pradesh and MD of Avadh Rail Infra said, “With festivals approaching, the cut in GST rates is a welcome step that will boost the growth of SMEs and MSMEs in Uttar Pradesh. It will also help expand manufacturing capacity in the state. As one of India’s largest consumer markets, UP is likely to benefit most from demand-driven MSME growth, which will ultimately push the state closer to becoming a trillion-dollar economy.”

According to official figures, Uttar Pradesh collected Rs 9,760 crore in GST in July 2025, a 7 percent increase over last year, and Rs 9,086 crore in August, a 10 percent rise. For FY 2024-25, the state’s total collection stood at Rs 1.12 lakh crore, ranking sixth nationally with a 7 to 9 percent contribution to India’s overall GST revenue.

However, not all sectors are celebrating. The garment industry has protested against the hike in GST on ready-made clothes priced above Rs 2,500, which has gone up from 12 percent to 18 percent. Traders argue the hike is unjustified and will hurt small retailers. “Clothing is a basic necessity, not a luxury. This increase has caused widespread resentment among traders across the country,” said Ashok Motiani, president of the Uttar Pradesh Garment Industry Association. He urged the government to roll back the hike and restore the rate to 5 percent.

Overall, the GST reforms are expected to put more money in the hands of consumers, ease costs for housing, healthcare and automobiles, and create long-term industrial capacity, setting Uttar Pradesh on track for stronger growth in the years ahead.

GST Revenue in UP

• July 2025 collection: Rs 9,760 crore (7 percent growth over July 2024)
• August 2025 collection: Rs 9,086 crore (10 percent growth over August 2024)
• Total collection FY 2024-25: Rs 1.12 lakh crore, sixth highest among states
• UP contributes 7 to 9 percent of national GST revenues