Prime Minister Narendra Modi has promised a new round of GST reforms by Diwali 2025, aimed at reducing the tax burden on both consumers and MSMEs. Market analysts believe that a rate rationalisation could boost demand across key sectors, especially in consumer and construction-linked industries.
Possible GST Reductions
According to reports from leading brokerages:
- Jefferies expects GST on cement, two-wheelers, and air conditioners to drop from 28% to 18%. Other categories that could see cuts include insurance, hybrid cars, garments, footwear, and processed foods.
- Citi highlighted medicines, non-alcoholic beverages, apparels, white goods, insurance, and cement as potential beneficiaries. It estimates that the combined effect of GST revision, income tax relief, and lending rate cuts in FY26 could equal 0.7–0.8% of GDP, boosting festive demand.
- Goldman Sachs pointed to consumer names likely to benefit from slab changes:
- Trent (Zudio apparel above ₹1,000)
- Page Industries (outerwear above ₹1,000)
- Bata (footwear below ₹1,000)
- Metro Brands (Walkway store expansion at sub-₹1,000 price points)
Stocks like Nestle, Dabur, and Titan may also gain.
- CLSA sees strong demand revival in air conditioners and cement if rates are cut to 18%. It noted that both sectors together account for nearly 3.5% of GST collections.
- Bernstein expects markets to react positively, projecting high single-digit Nifty returns for the year despite global tariff uncertainties. It prefers consumer-oriented sectors and recently upgraded staples and durables to “overweight.”
Market Outlook
Analysts agree that a GST reduction could revive consumption and improve corporate earnings, particularly in consumer durables, staples, cement, and automobiles. While some capex-driven sectors may face a short-term funding shift, festive demand is expected to provide a strong boost to FY27 earnings.
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