The GST 2.0 Overhaul
India is on the cusp of a sweeping overhaul of its Goods and Services Tax (GST) system. Prime Minister Narendra Modi, in his recent Independence Day address, laid out a vision for “next-generation” GST reforms, including:
A move from a four-slab setup to just two main rates—5% and 18%—with a special 40% “sin” tax for luxury and demerit goods like tobacco and alcohol.
Around 99% of items in the current 12% slab are expected to shift to the 5% bracket, while 90–99% of those in the 28% slab may move to 18%.
The reforms aim to simplify GST, ease compliance, boost consumption, and bring relief to households, small traders, and MSMEs
Market Sentiment and Domestic Momentum
Markets have responded positively. Analysts expect GST reforms to:
Boost domestic consumption, particularly in essentials and consumer goods
Lift investor sentiment, especially around festive spending seasons like Diwali.
Financial dailies report that stock indices are likely to open higher as GST simplification promises a tax burden reduction and improved macroeconomic conditions.
Sector Watch: Potential Market Winners a. FMCG & Consumer Durables
Lower GST on everyday goods—from soaps to electronics—should spur consumption and benefit companies in these segments. Consumer goods and durables are expected to see strong investor interest.
Automobiles & Auto Parts
With tax reductions, demand for vehicles—especially affordable models—could gain momentum. Analysts foresee auto-related stocks in focus.
Technology, Housing, Banks, and Defense
Leading financial voices highlight a range of stocks poised to benefit from the reforms:
Tata Motors, DLF, Godrej Properties, Dixon Technologies, Sun Pharma, UPL, Bharat Electronics (BEL), TVS Motor, Coromandel International, Godrej Agrovet.
Another portfolio includes BEL, Vishal Mega Mart, Infosys, SBI, and Bajaj Housing Finance. Analysts anticipate gains based on consumption-led demand across defense electronics, retail, financial services, and real estate.
Jefferies
The brokerage firm Jefferies anticipates that the rationalization of the GST rate may occur in the fourth quarter of this calendar year.
It perceives a favorable possibility that the GST on Cement, Two-Wheelers, and Air Conditioners could decrease from 28% to 18%.
Citi
Citi identifies potential beneficiaries of GST changes as medicines, processed foods, non-alcoholic beverages, certain apparel, white goods, insurance, and cement companies. The overall policy stimulus, including GST revisions and tax cuts, could boost GDP by 0.7% to 0.8%, enhancing festive demand and FY27 earnings outlook.
Goldman Sachs
Goldman Sachs highlights that products in the 12% GST slab may benefit significantly. Examples include Trent’s apparel over ₹1,000, Page Industries’ outerwear, Bata’s footwear under ₹1,000, and Metro Brands’ Walkway expansion. Stocks like Nestle, Dabur, and Titan may also gain.
CLSA
CLSA believes that materials and consumer durables, currently at 28% GST, could be reduced to 18%, significantly impacting air conditioner demand amid recent weakness. Cement and ACs contribute nearly 3.5% of total GST revenue, and their adjustment could mitigate this impact.
Trent: Apparel priced over ₹1,000, which constitutes one-third of the company’s total sales, primarily through Zudio.
Page Industries: Certain outerwear priced above ₹1,000.
Bata: Footwear priced under ₹1,000.
Metro Brands: Beneficial for the Walkway store expansion planned by the company, with prices below ₹1,000.
Despite short-term economic challenges and tariff uncertainties, Bernstein forecasts high single-digit returns for the Nifty for the rest of the year.
[Newsroom staff written original, where key claims or facts are used, I’ve referenced the original sources (like Reuters, FT, TOI, ET, The Mint etc.) transparently.]
