GST rationalisation props market

The GST rate cuts is what boosted the market sentiments today, something that was very much required after days and days of lacklustre trading.

The 56th GST Council meeting approved broad reforms to India’s eight-year-old indirect tax regime. Most changes come into effect from September 22, 2025, the first day of Navratri.

Key changes:

• A simplified two-slab GST structure: 5% (essential goods) and 18% (standard goods).
• Demerit or luxury items taxed at 40% (super-luxury, sin, and demerit goods).
• Tobacco and tobacco-related products are exempt from these changes.

  Market and Sectoral Implications

  Auto Sector:

• GST on small cars cut to 18% from 28%, larger SUVs at 40%.
• Ex-showroom prices of small cars may drop 12 to13%, likely boosting volume sales.
• Beneficiaries: Maruti Suzuki, Tata Motors, Mahindra & Mahindra.

FMCG / Consumer Goods:

• Essentials and packaged foods at 5 to18% GST - lower prices, higher demand.
• Stocks: Hindustan Unilever, Nestlé India, ITC, Dabur.

Consumer Durables & Electronics:

• Select appliances and electronics see tax relief - potential volume growth.
• Stocks: Bajaj Electricals, Voltas, V-Guard, Croma.

Hospitality & Travel:

• GST cut on hotels, domestic flights, and travel services - potential boost in discretionary spending.
• Stocks: IRCTC, Indian Hotels, Lemon Tree Hotels, MakeMyTrip.

Telecom & Digital Services:

• Lower GST on broadband and subscriptions may attract more subscribers.
• Stocks: Bharti Airtel, Jio Platforms (listed subsidiaries).

The short term view is positive for the market, especially for auto, consumer durables, FMCG, and hospitality stocks. And on the medium term, it will mean easier working capital flow and simpler GST compliance can support corporate margins and growth.

GST rationalisation is a structural positive, but the flip side is short-term margin compression, revenue uncertainty, and implementation risks. Investors should look for companies with strong pricing power, scale, and operational efficiency to benefit the most.