The Geotechnical Seismic Isolation (GSI) is recently recommended as an innovative base isolation system placed below the foundation of the superstructure for protection from earthquake damages. Low-shear modulus and high damping material such as Sand-Rubber Mixture (SRM) is used for the GSI layer. However, the compressible nature of SRM in the GSI layer leads to low bearing capacity and high settlement of foundations. In view of this, a GSI system consisting of SRM and geogrid reinforcement is proposed for low-rise buildings in the present study. Finite element based two-dimensional numerical investigation on the seismic performance of a two-storied building supported on raft footing resting on the proposed GSI system was carried out considering the soil–structure interaction. The nonlinearities of the subsurface materials were duly considered using hypoelastic formulations to account for the strain-dependent response. The effectiveness of geogrid reinforcement for the GSI system is demonstrated through seismic settlement analysis based on which optimum geogrid layers were chosen. Effect of various factors such as the thickness of GSI layer, frequency content of earthquake input motions on the seismic demand of the framed structure resting on the proposed GSI system was investigated. While the contribution of SRM was predominant in reducing the peak ground acceleration experienced by the building, the contribution of geogrids was evident in reducing the seismic settlement and lateral deformations on the structure. The results demonstrate the suitability of using the proposed GSI system with a thickness of 0.1B–0.2B (B is the footing width) with double layered geogrid reinforcement in significantly reducing the seismic demands of low-rise building.