GST 2.0 to drive structural rerating in markets; auto, consumer durables, FMCG, cement sectors poised to gain

The government’s recent rationalisation of Goods and Services Tax (GST) slabs is being widely viewed as a landmark reform with the potential to reshape India’s consumption story, accelerate formalisation of the economy, and drive equity market re-rating in the medium to long term. Market experts believe the move will provide an immediate boost to demand in key consumption-linked sectors, even as companies adjust to near-term transition challenges.

“Lower GST rates on essential goods, farm equipment, automobiles, and consumer durables will make these products more affordable, spurring demand at both urban and rural levels,” said Sunny Agrawal, Head of Fundamental Research at SBI Securities.

He said that sectors with significant tax cuts — including FMCG, auto (especially two- and three-wheelers, passenger vehicles), consumer durables, and cement — are poised to emerge as the biggest winners.

Agrawal highlighted that while companies may see short-term disruptions as they re-price inventory, the medium-term outlook remains strongly positive. “Auto OEMs have already priced in part of the benefit, but auto ancillaries, EMS players, hotels, and QSR operators still have considerable room for outperformance,” he said.

He added that the “troika” of GST 2.0, recent interest rate cuts, and lower personal income tax will serve as a powerful catalyst for consumption-led growth.

Asutosh Mishra, Head of Research at Ashika Institutional Equities – Ashika Stock Broking, termed GST simplification a “major consumption booster.” According to him, automotive, consumer durables, FMCG, cement, retail, apparel, and logistics are the sectors best placed to benefit. “Our estimates suggest a 10–20% surge in demand in mass-market segments, particularly in rural areas, driven by lower prices and higher disposable incomes,” he said.

At the same time, adverse impact may be seen on luxury/sin goods and unorganised FMCG, retail, and MSMEs hit by 5–10% revenue drops from compliance costs, he said.

He further said that auto/durable dealers may face 100–200 bps margin pressure from inventory mismatches.

Market sentiment and valuations

Both analysts believe the equity markets have partially priced in the reform, but see further upside as clarity emerges on earnings, festive season demand, and state revenue impacts. “If pent-up demand kicks in from late September, sectors like hotels, consumer durables, EMS, mall operators, and new-age retail businesses could see a strong rally,” said Agrawal.

Mishra, however, cautioned that external risks — such as FII selling and U.S. tariff developments — could temper near-term momentum. “Investors will watch for clarity on inverted duty structures and compliance timelines, but faster ITC refunds and smoother compliance will be key triggers for a broader market re-rating,” he said.

Sectoral winners and losers

Autos & Farm Equipment: Two-wheelers, farm equipment and passenger vehicles stand to benefit the most from lower GST rates, with companies like Hero MotoCorp , TVS Motor , M&M , and Escorts Kubota seen as early winners. Auto ancillaries such as Gabriel, Lumax Auto, and Minda Corp are also expected to gain from higher volumes.

FMCG & Consumer Staples: Reduced tax rates on daily essentials such as dairy, soaps, and hair oils will boost affordability, especially in rural markets.

Consumer Durables & EMS: White goods and electronics are set to see demand revival, with EMS players like Amber , PG Electroplast , and Epack positioned strongly.

Hotels & QSRs: Hotel chains such as Lemon Tree and The Park may benefit from lower GST on tariffs below ₹7,500, while QSRs like Jubilant Foodworks and Westlife will gain from lower input costs in dairy and food categories.

Logistics & E-commerce: Analysts expect a structural re-rating as GST formalisation drives efficiency. Quick commerce and e-commerce platforms such as Swiggy and Eternal (Zomato) will benefit from demand shifts to organised channels.

Cement & Infrastructure: Lower GST rates will support demand but transition costs and inventory adjustments may create short-term margin pressure.

Potential Losers: Insurance could face a setback due to the lack of input tax credit, while select MSMEs and unorganised FMCG/retail players may struggle with compliance costs and competitive pressures.

Long term outlook

Over a 3-5 year horizon, GST is expected to add 1-2 percentage points annually to GDP growth, analysts say. Agrawal emphasised that GST will enhance competitiveness by simplifying compliance, lowering tax burden, and creating a level playing field. Mishra added that formalisation could shrink the unorganised sector’s share in FMCG, retail, and logistics by 15–20% by FY30, boosting tax-to-GDP from 12% to 14–15%.

“GST is not just a tax reform — it’s a structural reset for India’s economy,” Agrawal said. Mishra projected that the combined benefits of GST, formalisation, and rising consumption could push India’s GDP to $5.5–6 trillion by FY30, while equity valuations will continue to reward companies delivering extraordinary profit growth.

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