On Independence Day 2025, Prime Minister Narendra Modi unveiled the “GST Reforms 2.0”, a landmark initiative aimed at simplifying India’s tax structure and providing relief to consumers ahead of Diwali 2025. The move is being hailed as the most significant overhaul of the GST framework since its initial rollout in 2017.
Following the announcement, market sentiment turned highly positive, with analysts identifying over 40 stocks—spanning sectors such as automobiles, finance, real estate, consumer goods, and cement—as likely beneficiaries. On Monday, these sectors witnessed sharp rallies as investors rushed to position themselves, with experts describing the reforms as the biggest indirect tax change since 2017.
Key Highlights of GST Reforms 2.0
- Simplified Tax Slabs: The current four-tier GST structure will be reduced to just two main slabs — 5% and 18% (excluding sin goods), given in the Financial Express.
- Major Shifts in Brackets:
- Nearly 99% of items in the 12% slab are expected to move down to 5%.
- About 90% of products in the 28% slab are projected to shift to 18%, according to market estimates.
- Household Savings: With several high-value consumption items currently in the 28% category moving lower, families could see meaningful savings on their expenses.
- Approval Timeline: The GST Council is likely to finalize the proposals in early Q3 FY26, with the Finance Ministry estimating a manageable revenue impact of ₹50,000 crore.
- Boost to Consumption: Retail prices are expected to fall by 4–5%, easing household budgets and encouraging higher spending across sectors.
What is GST?
The Goods and Services Tax (GST), implemented in India on July 1, 2017, is a comprehensive indirect tax that replaced several levies, including VAT, excise duty, and service tax. Based on the concept of “One Nation, One Tax,” GST aims to simplify the taxation process and promote greater transparency. It is charged on the supply of goods and services at every stage, though the end consumer ultimately bears the cost.
GST is structured into three parts — CGST (levied by the Centre), SGST (levied by the States), and IGST (applied on interstate trade and imports). By removing the problem of tax on tax, it lowers overall expenses for both businesses and consumers. Additionally, it fosters a unified national market, enhances compliance, and supports overall economic growth.
Components of GST
The Goods and Services Tax (GST) in India is divided into three major parts to ensure a fair sharing of revenue between the Central and State Governments.
1. CGST (Central Goods and Services Tax)
- Meaning: Collected by the Central Government on the supply of goods and services within a state (intra-state trade).
- Usage: Revenue is used for national-level expenses such as infrastructure, defense, and welfare programs.
- Example: If a trader in Delhi sells goods worth ₹1,00,000 within Delhi at 18% GST, then ₹9,000 goes to the Centre as CGST.
2. SGST (State Goods and Services Tax)
- Meaning: Collected by the State Government on intra-state sales of goods and services.
- Usage: Revenue supports state-level projects like healthcare, education, and local infrastructure.
- Example: From the same Delhi transaction, another ₹9,000 goes to the Delhi Government as SGST.
3. IGST (Integrated Goods and Services Tax)
- Meaning: Applied to interstate transactions (trade between states) and imports. This tax helps maintain smooth trade across state borders.
- Usage: Collected by the Central Government and later shared between the Centre and the destination state where goods or services are consumed.
- Example: If a seller in Maharashtra supplies goods worth ₹1,00,000 to a buyer in Karnataka, 18% GST = ₹18,000 is charged as IGST. The Centre later divides this amount between Maharashtra and Karnataka.
Which major sector Stocks Gain Spotlight After GST Reforms 2.0?
As per the Economic Times, the stock market reacted swiftly to Prime Minister Modi’s GST Reforms2.0 announcement, with major rallies across multiple sectors. Investor confidence surged as analysts highlighted over 40 stocks likely to benefit from the simplified tax structure.
1. Auto Sector
The proposed reduction of GST on small petrol and diesel cars from 28% to 18% is expected to make vehicles more affordable, boosting demand. Leading players such as Maruti Suzuki, Tata Motors, Hyundai Motor India, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, and Eicher Motors are projected to see strong gains.
2. Consumer & FMCG
Lower GST rates on essentials like butter, juices, and dry fruits will reduce prices and support household budgets. Shares of Hindustan Unilever, Nestlé India, and Dabur jumped between 4% and 7%, reflecting optimism in the sector.
3. Cement & Consumer Durables
The cement industry could see an additional ₹20,000–25,000 crore in revenues, supported by housing and infrastructure demand under GST reliefs. Similarly, consumer durables and home appliances are expected to benefit from lower costs, driving higher consumption.
4. Insurance
GST on life and health insurance premiums may drop from the current 18% to as low as 5% (or even zero), making policies more affordable. This could significantly boost policy adoption, strengthening the insurance sector’s growth prospects.
5. Financials
Higher consumption typically fuels lending activity, directly benefiting banks and NBFCs. Bajaj Finance and Bajaj Housing Finance surged up to 7%, supported by both GST-driven optimism and a recent sovereign credit rating upgrade.
6. Real Estate & Other Sectors
Real estate, along with other consumption-linked sectors, is also showing strong momentum as investors shift focus from capex-driven themes to demand-led opportunities.
List of Stocks Likely to Benefit from the Lower GST Slab
Brokerage reports suggest that a wide range of companies across multiple sectors could see positive momentum if GST rates are reduced. Here are the potential beneficiaries sector-wise:
1. Auto Sector
- Maruti Suzuki
- Tata Motors
- Ashok Leyland
- Bajaj Auto
- Hero MotoCorp
- TVS Motor
- Eicher Motors
- Mahindra & Mahindra
- Escorts
2. Consumer & Durables
- Voltas
- Havells
- Blue Star
- Amber Enterprises
- Whirlpool
- Hindustan Unilever (HUL)
- Britannia
- Dabur
- Emami
- ITC
- Varun Beverages
- Patanjali Foods
3. Cement
- Ultratech Cement
- JK Cement
4. Banking & Finance
- ICICI Bank
- HDFC Bank
- IDFC First Bank
- Bajaj Finance
5. Insurance
- Niva Bupa
- Max Life Insurance
- HDFC Life Insurance
- Star Health
6. Retail & Apparel
- Relaxo Footwear
- Shoppers Stop
- Trent
- Vedant Fashions
- Bata India
- Metro Brands
7. Hotels & Hospitality
- Lemon Tree Hotels
- Indian Hotels Company (Taj Group)
- Chalet Hotels
8. Others
- Delhivery
- Swiggy
- Eternal
- Titan Company
Why GST Reforms 2.0 Could Impact Diwali?
- Boost to Festive Spending: Simplified GST slabs are likely to reduce prices by 4–5%, giving consumers more purchasing power and encouraging higher festive season demand for autos, FMCG, durables, and lifestyle products.
- Shift in Market Themes: Investors are moving away from capex-driven sectors like infrastructure toward consumption-focused sectors such as auto, retail, FMCG, and housing, reflecting confidence in demand revival.
- Strong Market Reaction: Following the announcement, Nifty50 and BSE Sensex hit record highs, while the auto index surged nearly 5%, signaling optimism among investors.
- Global & Domestic Tailwinds: The rally was further strengthened by supportive macroeconomic factors, including the recent S&P sovereign credit rating upgrade, which added to positive market sentiment.
- Wider Economic Impact: The reforms are expected to lift consumer sentiment, boost corporate earnings, and improve India’s overall growth outlook during the festive season.
Benefits of GST
1. Simplified Taxation
Earlier, businesses had to deal with a complex system of multiple indirect taxes such as VAT, excise duty, service tax, and octroi. GST replaced all these with a single, unified tax structure. This has streamlined the entire taxation process, reduced confusion, and made compliance much easier for businesses across sectors.
2. Reduced Prices for Consumers
Before GST, goods and services often faced the burden of “tax on tax” (cascading effect), which inflated prices. By eliminating double taxation and allowing seamless input tax credits, GST has lowered the overall cost of goods and services. This benefits consumers directly, making products more affordable.
3. Ease of Doing Business
With one tax structure applicable across all states, businesses no longer need to worry about navigating different state tax laws. This uniformity promotes smoother inter-state trade, reduces logistic bottlenecks, and enables companies to expand their operations nationwide without facing tax-related hurdles.
4. Higher Compliance and Transparency
The digital-first approach of GST, including online registration, e-filing of returns, and an input tax credit mechanism, has improved compliance significantly. It has reduced scope for tax evasion, enhanced accountability, and brought more businesses into the formal economy, ensuring a fairer system.
5. Boost to the Indian Economy
GST plays a vital role in strengthening the economy. By reducing tax leakages and widening the tax base, it increases government revenues. Moreover, the formalization of businesses under GST contributes to better data-driven policymaking and supports GDP growth, paving the way for long-term economic stability.
Challenges of GST
1. Technical Issues During the Initial Phase
At the time of GST’s launch, many businesses encountered difficulties adapting to the digital system. The GST Network (GSTN) portal, designed for registrations, return submissions, and claiming input tax credit, frequently experienced downtime and errors. This posed significant challenges, especially for small businesses with limited experience in online compliance.
2. Higher Compliance Pressure on Small Businesses
For small and medium enterprises (SMEs), GST has increased the burden of compliance. Unlike earlier tax systems with simpler requirements, GST demands multiple monthly and yearly filings, invoice reconciliation, and strict adherence to deadlines. Many smaller firms have had to hire accountants, tax consultants, or invest in compliance software, thereby raising operational costs.
3. Complexity Due to Frequent Rule Changes
Since its rollout, GST has seen constant modifications, including rate changes, amendments, and new notifications. Although aimed at improving efficiency, these updates often created confusion among businesses and tax professionals. The continuous changes made it difficult for companies to stay updated, resulting in compliance challenges and disruptions in operations.
4. Dependence of States on GST Compensation
By replacing several state-level taxes, GST reduced the independent revenue base of states. To balance this, the Central Government assured a compensation mechanism for a period of five years. However, delays in releasing these funds strained the finances of many states, making them heavily reliant on central support. This dependence also sparked debates around fiscal federalism and the financial autonomy of states.
Final Thoughts
The GST Reforms 2.0, introduced by Prime Minister Narendra Modi in 2025, represent the biggest shift in India’s tax framework since GST was rolled out in 2017. By streamlining tax slabs and lowering rates, the reforms are expected to reduce prices, enhance consumer spending power, and drive stronger demand across multiple sectors. With more than 40 stocks across autos, FMCG, cement, financials, and insurance poised to gain, the reforms open up significant growth opportunities for businesses and investors alike. As the country approaches the Diwali season, GST 2.0 is set to ease household budgets while also supporting long-term market growth and economic momentum.
