The Goods and Services Tax (GST) Council convened a meeting on September 3, 2025, to discuss and finalize key reforms to the existing tax structure, with potential ramifications for the stock market, particularly for sectors like Fast-Moving Consumer Goods (FMCG), pharmaceuticals, and tobacco. Prime Minister Narendra Modi's earlier announcement regarding a GST overhaul by Diwali has already stirred significant activity on Dalal Street.

Key Decisions and Potential Impacts

The GST Council has approved a shift to a two-slab structure, with rates of 5% for essential goods and 18% for non-essential items. This replaces the previous four-slab system of 5%, 12%, 18%, and 28%. A special rate of 40% is slated for "sin goods," including tobacco, carbonated beverages, and luxury cars priced above ₹50 lakh. These changes, decided unanimously, are scheduled to take effect on September 22, 2025. However, the revised rates will not immediately apply to tobacco products; the existing rates and compensation cess will continue until loan and interest payment obligations are met. The Union Finance Minister will determine the transition date for tobacco-related products.

The proposed changes aim to reduce retail prices by 4-5%, offering relief to household budgets and stimulating consumption across various categories.

Sector-Specific Analysis

• Automobile: The automobile sector is expected to be a major beneficiary of the GST reforms. Analysts predict that a 7-10% GST cut could lead to significant price reductions for two-wheelers, small cars, and tractors, potentially boosting industry volumes by 2-6% between FY26-28. Automakers such as Maruti, Toyota Motor, and Suzuki Motor are anticipated to be big winners. Consumers had been delaying purchases in anticipation of these cuts.
• FMCG: FMCG companies like Hindustan Unilever, Godrej, and ITC are likely to benefit from lower GST rates on daily essentials. Some fast moving consumer goods have seen their GST rates reduced from 12% or 18% to 5%, including items like namkeen, bhujiya, sauces, instant noodles, coffee, ghee, butter, and chocolates.
• Tobacco: The proposal to impose a 40% tax on sin goods like tobacco has raised concerns for companies such as ITC, which derive a major portion of their revenue from cigarettes. While some analysts believe that higher tax rates may not significantly deter consumption in the long term, there could be a short-term negative impact on stock prices due to market sentiment.
• Cement: The cement sector could see a potential revenue boost with GST rates dropping from 28% to 18%. This could lead to lower prices and margin improvements for real estate developers.
• Financial Services: Banks may gain from increased consumption driven by the GST reforms. The council is also expected to discuss input tax credit (ITC) for corporations that provide group health and life insurance for employees.

Market ожидания и экспертные мнения

The stock market is closely monitoring the GST Council meeting for indications of a potential consumption boost and its fiscal implications. Experts suggest that the reforms could trigger a strong consumption upcycle, particularly benefiting lower-income households and driving growth in various sectors. Some analysts believe that these reforms could offset the impact of tariffs on Indian goods to a limited extent.

However, some experts caution that too many exceptions and exclusions in the simplified two-tier rate system could dilute the impact of the GST reform. Concerns remain about the potential revenue loss for states due to the rate rationalization. Some states have proposed an additional levy on luxury and sin goods to offset these losses.