A Landmark GST Reform for India

In its September 3, 2025 meeting, the GST Council announced the largest restructuring of India’s Goods and Services Tax since its July 2017 rollout. The reform abolishes the 12% and 28% slabs, streamlining GST into a simpler two-rate system 5% for mass-consumption essentials, 18% for standard goods and services, and a 40% bracket for luxury items and sin goods.

The move is strategically timed ahead of Navratri and Diwali, signaling a government push to stimulate consumption and ease compliance burdens for both businesses and taxpayers.

Sectoral Winners and Losers

FMCG & Essentials : Mass Affordability Push

• Products like toothpaste, shampoo, biscuits, chocolates, and noodles drop from 12–18% to 5% GST.

• A game-changer for rural affordability and mass consumption, benefiting FMCG giants like HUL, ITC, Nestlé India, Britannia, and Dabur.

• Expected surge in kirana retail demand.

Consumer Durables & Electronics : Festive Tailwinds

• Air-conditioners, dishwashers: 28% → 18%.

• TVs and monitors now uniformly taxed at 18%.

• Retailers like Reliance Digital, Croma, and Amazon/Flipkart set for aggressive festive promotions.

Auto Sector : Mixed Impact

• Winners: Small cars, two-wheelers ≤350cc, buses, and trucks drop to 18%, boosting entry-level mobility and benefiting Maruti Suzuki, Hero MotoCorp, Bajaj Auto, and Ashok Leyland.

• Losers: Premium SUVs, luxury cars, and high-end motorcycles fixed at 40%, likely impacting Mahindra’s premium SUVs, Tata Motors’ Harrier/Safari, and imported brands.

Insurance : Major Structural Positive

• Life and health insurance premiums become GST-exempt.

• Cuts annual policy costs by 18%, improving accessibility and benefiting HDFC Life, ICICI Prudential, SBI Life, Star Health.

Cement & Construction : Infrastructure Catalyst

• Cement tax falls from 28% to 18%, aiding affordable housing and infra projects.

• Boost for UltraTech Cement, Shree Cement, Dalmia Bharat.

Textiles, Footwear & Paper: SME Boost

• Textiles and footwear: 12% → 5%.

• Select paper categories: 12% → Nil.

• Strengthens SME manufacturing and retail consumption.

Agriculture & Renewable Energy : Rural + Green Growth

• Farm equipment, irrigation systems, and renewable energy gear now at 5%.

• Improves rural mechanization and project viability in clean energy.

Healthcare & Pharma : Socially Transformative

• All medicines and medical devices now taxed at 5%, making healthcare more accessible and easing compliance for pharma firms.

Luxury Goods & Beverages : Demand Headwinds

• Carbonated drinks and luxury imports taxed at ~40%.

• Varun Beverages, PepsiCo, Coca-Cola bottlers, and high-end auto brands face pricing pressure.

Wider Economic Impact

• Consumption Boost : Lower taxes on FMCG, cement, and autos will stimulate demand during festive season.

• Inflation Control : Essentials and medicines becoming cheaper may soften CPI inflation, supporting RBI’s accommodative policy stance.

• Simplified Compliance: Fewer slabs simplify ITC reconciliation and cut litigation risk.

• Fiscal Trade-Off : Short-term revenue loss likely, but higher compliance and consumption volumes may offset over time.

• Stock Market Impact : Positive bias for mass-market FMCG, insurers, infra, and healthcare stocks, while luxury auto and beverage companies face headwinds.

Final Word

GST 2.0 is India’s most significant tax reform in nearly a decade a bold move to simplify taxation, spur consumption, and drive economic growth. For households, it means cheaper essentials, healthcare, and housing inputs; for businesses, fewer disputes and smoother compliance; and for investors, a clear signal on sectoral winners and losers. This reset could redefine India’s consumption patterns and market sentiment heading into FY26.

Sources

Business Standard,

Economic Times,

Financial Express,

CNBC-TV18,

GST Council Press Brief.