The Indian government is reportedly considering significant Goods and Services Tax (GST) rate cuts, potentially impacting several sectors. The proposals, expected to be discussed at the 55th GST Council meeting on September 3-4, 2025, aim to ease the tax burden on households, boost consumption, and reduce classification disputes across product categories.

Key Proposed Changes

The proposed reforms include a shift from the existing four-tier GST structure to a simplified two-slab structure of 5% and 18%, while maintaining a 40% slab for luxury and sin goods. Many items currently taxed at 12% may move to the 5% slab, and most goods in the 28% slab could be shifted to 18%.

• Cement and Automobiles: GST on cement, two-wheelers, and air conditioners could be reduced from 28% to 18%. This could significantly reduce pricing pressures and improve demand in these segments. Passenger and commercial vehicles are also expected to benefit from this change.
• Tractors and Agriculture: GST on tractors may be reduced to 5% from the existing 12%. Additionally, GST on farming machinery and parts, as well as dairy machinery, may also be placed under the 5% slab.
• Fast-Moving Consumer Goods (FMCG): Companies operating within the FMCG sector could benefit from lowered GST rates on processed foods and daily essentials. This may improve affordability and widen customer reach.
• Education: Items like mathematical boxes, geometry boxes, and color boxes could see their GST rates reduced from 12% to 5%.

Potential Impact and Beneficiaries

These GST reforms are expected to have a positive impact on various sectors. Consumer-driven sectors such as auto, FMCG, cement, and housing stand to benefit the most.

• Automobile Industry: Experts believe that the entire auto industry will benefit from the GST rate cuts. Maruti Suzuki and Hero MotoCorp may be among the biggest beneficiaries.
• Cement Industry: A GST cut from 28% to 18% could reduce cement prices by about 7-8%, benefiting cement companies.
• Financial Sector: Banks such as ICICI Bank, HDFC Bank, and IDFC First Bank could see faster retail loan growth, while Bajaj Finance stands to benefit from lower EMIs on consumer durables.
• Consumer Durables: Companies like Voltas, Havells, and Amber Enterprises could see stronger volumes.
• Logistics: Rising demand for durables, staples, and discretionary goods will aid logistics players such as Delhivery. Quick commerce platforms like Swiggy and Eternal also stand to gain from higher household consumption.

Considerations and Concerns

While the proposed GST rate cuts are expected to boost consumption and ease household budgets, there are also concerns about potential revenue loss. The Finance Ministry has estimated a revenue impact of about Rs 50,000 crore annually. To offset potential revenue loss from reducing GST on certain items, there are discussions about increasing GST on high-end electric vehicles (EVs) that cost over Rs 40 lakh and are imported.

Conclusion

The proposed GST rate cuts represent a significant overhaul of India's indirect tax structure. The reforms aim to simplify the tax system, reduce the tax burden on consumers, and boost demand across various sectors. The GST Council's decisions in the upcoming meeting will be crucial in shaping the future of GST in India and its impact on the economy.