GST Overhaul: Auto To FMCG — Sector-Wise Impact Of Modi's Pre-Diwali Tax Relief Push

In a potential economic announcement ahead of Diwali, Prime Minister Narendra Modi promised a set of next-generation reforms to the Goods and Services Tax, aiming to reduce the tax burden on consumers and empower small businesses, especially in the MSME sector. As expectations rise around a broad-based GST rate cut, various sectors of the economy are likely to see sweeping impacts. From consumer durables to automobiles, and from food products to hospitality.

While the exact timeline and scale of the reforms are still not out, the prime minister has promised that these reforms will kick in by Diwali 2025. Below is a sector-by-sector look at the potential winners and areas of concerns stemming from the anticipated GST overhaul.

The automobile sector stands to benefit significantly, with proposed GST cuts from 28% to 18% on two-wheelers with engines under 250cc and passenger vehicles with engines below 1.2L. Tractor GST rates may also be slashed from 12% to 5%

Packaged foods, dairy products, juices and coconut water may see GST rates fall from 12% to 5%, enhancing affordability for consumers.

Beneficiaries of the reform in FMCG include Britannia, Nestlé, Heritage Foods, Dodla Dairy, Tata Consumer Products, Parag Milk Foods, Bikaji, Gopal Snacks.

For cement sector, the shift from the 28% GST slab to 18% could potentially lower prices by Rs 30 to Rs 40 per bag.

While demand for cement is generally inelastic to tax changes, companies may use this window to absorb input cost pressure or take moderate price hikes in the future.

Air conditioners, dishwashers, and TVs larger than 32 inches could become more affordable with GST cuts from 28% to 18%.

The beneficiaries in the sector include Voltas, Blue Star, Havells, Amber Enterprises, Dixon Technologies, PG Electroplast.

The GST reform could help boost a surge in festive season sales and offset any delayed purchases in the sector.

Garments priced above Rs 1,000 and footwear in the Rs 1,000- Rs 5,000 range are expected to see a GST cut from 12% to 5%. The companies that can become likely beneficiaries from this are Trent, Vedant Fashions and Sai Silk.

In terms of footwear beneficiaries, Bata India, Relaxo footwear and Campus activewear are key players. A potential rate cut could trigger volume-led growth and improve footfalls in offline retail.