Despite lower prices, the industry is expected to see a 10 – 15 per cent drop in sales in FY2026. The main reason is weak summer demand in 2025 because of heavy and untimely rains.
The Goods and Services Tax (GST) cut on room air conditioners (RACs) is set to make them cheaper by up to Rs. 3,000, news agency ANI reported quoting a new report. This benefit will outweigh the extra cost expected from upcoming energy efficiency rules. The GST rate on RACs below 2 tonnes has been reduced from 28 per cent to 18 per cent under the new GST 2.0 reforms. This will lower prices by around 6 – 8 per cent, which means buyers could save about Rs. 2,000 – 3,000 on each unit, the ICRA report said. Experts believe this move will also help push demand later in the financial year.
At the same time, new Star label rules for energy efficiency, starting January 2026, are likely to make RACs costlier by Rs. 500 – 2,500 per unit. “The benefit of lower GST will be partly offset by these changes. However, the new rules may lead to advance buying in late 2025, helping manufacturers recover some of the sales lost this summer,” Kinjal Shah, Senior Vice President at ICRA was quoted as saying by IANS.
Despite lower prices, the industry is expected to see a 10 – 15 per cent drop in sales in FY2026. The main reason is weak summer demand in 2025, as heavy and untimely rains between April and July reduced the number of heatwave days. Compared to strong growth of 40 50 per cent in the same months of 2024, sales fell 15 – 20 per cent this year, especially in North and Central India.
Even so, experts say the long-term outlook remains positive, as more urbanisation, rising incomes, and replacement demand will keep the market strong.
ICRA also expects manufacturers to expand capacity by 40 – 50 per cent in the next two years, investing around Rs. 4,500–5,000 crore. The government’s Production-Linked Incentive (PLI) scheme is also likely to increase local sourcing of components from 50- 60 per cent today to 70–75 per cent by FY2028.
(With IANS inputs)
