The GST Council’s decision to move to a two-rate structure with effect from September 22 is the big news today. Health and life insurance will be exempt from GST. and tax rates are slashed across categories, with maximum benefit to FMCG, fertilisers, agricultural and medical equipment, followed by cement, auto and durables.The Government expects this rate rationalisation to hit revenue to the tune of Rs 48,000 crore or 0.15% of GDP.
However, leading market experts believe the potential buoyancy in tax collections and boost in consumption will help offset the revenue hit and may also help absorb the hit from the tariff shock.
Several stock market gurus have put in their views on how the GST rate rationalisation may impact the market and the overall economy. Here is a quick look-
New GST rate to help offset adverse impact of US tariff: Nilesh Shah
Nilesh Shah of MD Kotak Mahindra AMC explained that the “GST slab consolidation and rate rationalization is “ek teer kai nishaan” The latest GST announcement lowers inflation, increases growth, boosts consumer sentiment, doesn’t disturb path of fiscal consolidation, improves ease of doing business and partially help offset the adverse impact of US tarriff in the quarters to come.”
He considers the “GST slab and rate rationalisation as well as the process improvement, are steps in the right direction.” However, he warned that “while the leakages and fraud of GST need to be dealt with with an iron hand, process improvement should be a continuous affair with a feedback loop.”
New GST rate shield against global headwind: Gautam Duggad
Motilal Oswal calls the GST rate as part of the next wave of reforms in works: They expect a cavalry of reforms after GST 2.0, including the long-overdue factor market reforms. Gautam Duggad, Head of Research – Institutional Equities at Motilal Oswal Financial Services believes that “ The resolute stance on simplifying the GST structure should not be seen just as ‘tax reform’ but more as ‘growth reform’. Through simplified rates and processes, the government intends to boost consumption sentiment. As the Prime Minister has indicated, there will be further reform measures across multiple domains, intended to unleash the animal spirits of the economy, providing a shield against the global geopolitical headwinds.”
New GST rate to kickstart earnings upgrade cycle
According to Emkay, by simplifying the rate structure and lowering effective prices across key discretionary categories, the reform creates an immediate demand stimulus. Manish Sonthalia, Director and CIO, Emkay Investment pointed out that “GST 2.0 should be viewed as more than just a tax rationalization exercise – it is a structural reform with the potential to decisively shift India’s growth trajectory toward a consumption-led cycle. While states could face near-term fiscal pressures, we believe compensatory measures are likely, and the broader growth dividend outweighs the risks. Overall, GST 2.0 could mark the beginning of an earnings upgrade cycle, with discretionary consumption leading the way.
New GST rate to boost consumption: Ajay Bagga
According to market veteran Ajay Bagga, “Higher consumption can be expected . Sectors from staples, durables, autos, cement, paints, and textiles all benefit. Well timed to catch the festival season demand. Expect a consumption boost for the economy . Bank loans to fund the durables and autos should also go up. The theoretical revenue loss will be more than made up by higher volumes as per our expectations.”