In a landmark decision, the 56th GST Council meeting on September 3, 2025, approved sweeping tax reforms under “GST 2.0,” reducing the number of slabs from four to three. The move — billed as the biggest overhaul since GST’s launch — is expected to simplify compliance, increase disposable incomes, and kickstart a fresh consumption cycle across the economy.
The revised rates will take effect on September 22, 2025, the first day of Navratri.
“GST 2.0 should be viewed as more than just a tax rationalisation exercise – it is a structural reform with the potential to decisively shift India’s growth trajectory toward a consumption-led cycle,” said Manish Sonthalia, Director and CIO, Emkay Investment Managers.
He noted that the simplified rate structure could deliver “a meaningful fiscal impulse of about 0.5% of GDP by FY27,” potentially sparking an earnings upgrade cycle led by discretionary consumption.
The recent rationalisation of GST slabs under GST 2.0 is expected to set the stage for a strong revival in consumption and improved sectoral performance across the economy. Industry experts and brokerages believe this structural reform will simplify compliance, boost affordability, and trigger a demand resurgence in both rural and urban markets.
“Some of the key sectors that could be key beneficiaries are Insurance, Consumer Durable, Building Materials, Automobiles, Retail, Cement, FMCG, and Real Estate,” Axis Securities said. It added that a meaningful improvement in corporate earnings is likely from H2FY26 as consumption gains translate into stronger operational performance.
Sectors to Watch Out For
FMCG
The new GST structure now has three slabs — 5%, 18% and 40% — with the earlier 12% and 28% categories scrapped. The 5% “merit” rate covers a wide range of essentials like hair oil, soaps, toothpaste, bicycles, kitchenware and packaged foods such as namkeens, noodles, chocolates, butter and ghee. Staples like paneer, paratha, chapati and UHT milk are now tax-free.
According to brokerage Nuvama Institutional Equities, recent GST cuts are set to boost FMCG consumption via higher disposable incomes, stronger promotions and grammage additions in low-unit packs. Meanwhile, it added that larger packs shall benefit from price cuts/promotions.
Commenting on the FMCG sector, Sonthalia said the benefits are more nuanced – packaged foods are well-placed, but larger incumbents may continue to face pressures on share and pricing power.
Cement
The brokerage also sees the GST rate cut benefiting the cement sector. “A reduction in GST rate on cement from 28% to 18% is positive for the sector. While it may constrain price hikes in the near-term, we believe it can boost prices and the premiumisation trend over the medium term,” said the brokerage.
Auto sector and electronics
Electronics and automobiles, including TVs, air conditioners, motorcycles under 350cc and small cars, move to the 18% slab, while EVs retain their concessional 5% rate.
Brokerage Emkay Global said that GST reforms include substantial tax reductions across auto segments while addressing industry worries around the inverted duty structure (all auto components now uniformly at 18% vs 18-28% earlier).
The decision to maintain taxation on EVs (stable at 5%) would act as an added tailwind for the ongoing electrification, the brokerage said, adding that this strategic tax relief in the auto space could potentially offer a 5-10% boost in demand across categories.
Luxury cars and bigger SUVs, however, have been kept out of the GST benefit.
Sonthalia, meanwhile, said that discretionary consumption is set to see the sharpest pickup, with consumer durables, autos, leisure goods, and select lifestyle segments emerging as the biggest beneficiaries.
Insurance
Among other cuts, life and health insurance have been made GST-free, providing a direct benefit to policyholders and potentially increasing insurance penetration across the country.
“Life and general insurance companies would stand to gain, provided there is not much increase in premiums, as they would lose input tax credit. Covering a larger population can lead to enhanced insurance penetration,” said Juzer Gabajiwala, Director at Ventura.
Real estate
For the residential sector, one of the most significant advantages comes from the reduction of GST on key construction materials such as cement, which is expected to lower overall construction costs by 3–5 per cent and improve housing affordability.
NBFCs
In addition, the government’s decision to cut GST rates across 396 items is likely to leave consumers with higher disposable income, which could boost credit demand — a positive development for both banks and non-banking financial companies (NBFCs).
Gabajiwala pointed out that the move could likely result in lower interest rates, offering relief to home loan EMIs and benefiting the broader BFSI sector.
Top Picks to Play GST 2.0
Axis Securities’ positive GST 2.0 strategy includes majority of FMCG companies, all cement makers, and leading auto and retail names. Its preferred picks include Maruti, TVS Motors, Hero Motocorp, UNO Minda, Trent, Avenue Supermart, and Doms Industries. These stocks are expected to benefit from stronger discretionary income, rising consumption trends, and improved margin profiles in the coming quarters.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
