GST 2.0: Major Rate Cuts Across Sectors Set to Boost Over 90 Stocks
The GST Council has announced significant rate reductions across multiple sectors, effective September 22. Key changes include GST cuts on two-wheelers below 350cc and small cars from 28% to 18%, packaged water and chocolates from 18% to 5%, cement from 28% to 18%, and ACs and TVs from 28% to 18%. Life and health insurance policies are now fully GST-exempt. These reductions are expected to benefit companies in automotive, FMCG, construction, insurance, and consumer durables sectors. Economists predict these changes could add 100-120 basis points to GDP over the next six quarters and potentially kickstart positive trends for Indian equities.
*this image is generated using AI for illustrative purposes only.
The Goods and Services Tax (GST) Council has unveiled a series of significant rate reductions across multiple sectors, dubbed 'GST 2.0', which is expected to have far-reaching implications for both businesses and consumers. The new rates, set to take effect from September 22, are anticipated to boost over 90 stocks across various industries.
Key Rate Changes
The GST Council has announced several notable rate reductions:
- Automotive Sector: GST on two-wheelers below 350cc and small cars slashed from 28% to 18%
- FMCG Items: Tax on packaged water and chocolates reduced from 18% to 5%
- Construction Materials: Cement GST rate cut from 28% to 18%
- Consumer Durables: ACs and TVs to see GST reduction from 28% to 18%
- Insurance: Life and health insurance policies now fully exempted from GST
Industry-wise Impact
Automotive Sector
Companies like Hero MotoCorp, Bajaj Auto, Maruti Suzuki, and Mahindra & Mahindra (M&M) are expected to be major beneficiaries of the rate cuts in the auto sector. The reduction in GST for two-wheelers and small cars could potentially boost sales and improve affordability for consumers.
FMCG Sector
Leading FMCG companies such as ITC, Britannia, Hindustan Unilever (HUL), and Nestle are likely to benefit from increased demand volumes following the tax reduction on packaged water and chocolates.
Construction and Real Estate
The cement industry, represented by companies like UltraTech and Ambuja Cements, is poised to gain from the significant GST rate cut, which could potentially stimulate demand in the construction sector.
Insurance Sector
Insurance companies, including SBI Life and HDFC Life, are expected to see positive impacts from the complete GST exemption on life and health insurance policies.
Consumer Durables
Manufacturers of air conditioners and televisions, such as Blue Star and Voltas, are among the potential gainers from the reduced GST rates on consumer durables.
Economic Outlook
The GST rate reductions are expected to have a substantial impact on the Indian economy:
- Motilal Oswal suggests that these changes could kickstart positive trends for Indian equities.
- Elara economist Garima Kapoor estimates that the consumption uplift resulting from these rate cuts could add 100-120 basis points to GDP over the next six quarters.
Conclusion
The GST 2.0 rate reductions represent a significant move by the government to stimulate consumption and economic growth across multiple sectors. As businesses and consumers adapt to these changes, the coming months will likely see increased activity in the affected industries, potentially leading to a broader economic uplift.
Investors and market watchers will be keenly observing how these tax cuts translate into corporate performance and consumer behavior in the near to medium term.
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