India's proposed GST 2.0 reforms are generating considerable buzz, with analysts suggesting a potential reshaping of investment strategies, particularly in the FMCG, auto, and tyre sectors. These reforms aim to rationalize tax slabs, simplify compliance, and improve affordability for consumers, potentially boosting demand and earnings for consumption-led companies.

GST 2.0: Key Changes and Potential Impact

The GST 2.0 proposal includes several significant changes to the current GST structure:

• Lower Tax Slabs: Products currently taxed at 12%, such as processed foods, footwear under ₹1,000, and select wellness items, may move to the 5% slab. High-ticket consumer durables, including air conditioners and large televisions, could see GST drop from 28% to 18%, potentially lowering retail prices by roughly 8%.
• Focus on Affordability: The government's focus on shifting goods from higher tax brackets to lower ones is a direct effort to put more money in the hands of the common man.
• Luxury and Sin Goods: Luxury and sin goods like cigarettes and aerated beverages are expected to remain at higher rates or attract additional cess, protecting government revenue.
• Simplified Structure: The existing GST regime has many slabs, including 5%, 12%, 18%, and 28%. GST 2.0 aims to create a simpler two-slab structure: 5% and 18%.

Sector-Specific Implications for Investors

• FMCG: GST 2.0 cuts are expected to fuel consumption across both rural and urban markets, reducing price sensitivity for mass categories while also supporting premiumization. Companies in the FMCG could see volume growth as products become more affordable for price-sensitive consumers. Leaders such as ITC, Nestle, Britannia, and Hindustan Unilever are seen benefiting from improved volume growth as households stretch their budgets towards packaged food and essentials.
• Automobiles: The auto sector is expected to see the sharpest demand revival, with two-wheelers and entry-level cars becoming more affordable just as rural incomes recover and the festive season approaches. Mass-market players in the Automotive car-making segment stand to gain. Stocks such as Maruti Suzuki, Hero MotoCorp, and Mahindra & Mahindra are positioned to capture a quicker sales rebound, marking a turning point for the industry after a prolonged demand slowdown.
• Tyres: The Automotive Tyre Manufacturers Association (ATMA) has appealed to the government to slash the GST on automotive tyres from the existing 28% to 5%, stressing that tyres should not be treated as luxury items given their substantial cost burden on crucial sectors such as transportation, agriculture, mining, and construction. Lowering of GST on automotive tyres would directly reduce vehicle operating costs and help bring down logistics costs, while also extending benefits to farmers, small traders, service providers, and the infrastructure and mining sectors.

Broader Economic Impact and Investment Considerations

Analysts estimate the move could lift GDP growth by 50–70 basis points and accelerate the earnings cycle for consumption-led companies in FY26. By lowering effective prices in both essential and discretionary categories, the policy creates a multiplier effect that benefits consumers, companies, and the broader economy.

For investors in consumption-focused funds, these measures may provide opportunities to rebalance portfolios towards sectors poised for demand growth and exposure to a medium- to long-term consumption theme, supported by policy and macro tailwinds. Rising rural incomes, women-centric cash transfers, and easing inflation could amplify the effect of lower GST rates, creating a favorable environment for discretionary and essential spending alike.

However, investors should conduct thorough research and consider their risk tolerance before making investment decisions based on anticipated policy changes. The government will need to manage potential revenue loss. Center-state coordination remains the biggest risk.