GST 2.0 Reform 2025: Top Stocks & Sectors Benefiting from Tax Cuts
GST 2.0 cuts taxes across FMCG, autos, cement and healthcare while keeping sin and ultra-luxury goods higher. Discover the top stocks and sectors set to benefit from India’s landmark tax reform.
The Government of India (GOI) has rolled out GST 2.0, a landmark overhaul of the indirect tax system. Effective from September 22, 2025, this reform is designed to reduce household tax burdens, revive consumer demand during the festive season and simplify compliance.
According to Kotak Institutional Equities, GST rationalisation combined with income tax adjustments could lift GDP growth by 0.7–0.9% annually, helping to cushion ongoing macroeconomic headwinds.
Key Highlights of GST 2.0
Simplified Tax Structure
- Only two standard slabs remain: 5% and 18%
- A 40% slab introduced for sin goods and ultra-luxury items
- Several items moved from higher to lower slabs, easing the burden on the common man
Focus on Healthcare and Relief
- 33 life-saving medicines moved to a 0% GST slab
- Cancer and chronic disease drugs, diagnostic kits and critical equipment exempted
- Health and life insurance policies now GST-free
Boost for Daily Essentials
- Household items such as hair oil, shampoo, toothbrushes and soaps reduced to 5%
- Food items like namkeen, pasta, coffee, chocolates and noodles also taxed at just 5%
- Staples like paneer, UHT milk and Indian breads now fully exempt
Sector-Wise Impact of GST 2.0
1. FMCG & Consumer Goods
- Packaged food, snacks, biscuits, chocolates and dairy products taxed at lower rates
- Reduction in prices expected to spur rural and urban demand
- Beneficiaries: HUL, Dabur, Britannia, Nestle, Colgate, Godrej Consumer
2. Automobiles
- Small cars, motorcycles (≤350cc), 3-wheelers, trucks and buses reduced to 18% from 28%
- Tractors and tractor parts down to 5% – a big boost for rural economy
- EVs unchanged at 5%, removing uncertainty around higher taxation
- Beneficiaries: Maruti Suzuki, Tata Motors, M&M, Eicher Motors, Bajaj Auto, TVS Motor
3. Cement and Building Materials
- Cement tax cut to 18% from 28%
- Positive sentiment expected in the affordable housing segment
- Beneficiaries: Ultratech, ACC, Ambuja Cements
4. Consumer Durables
- Air-conditioners, dishwashers, televisions cut to 18% from 28%
- Expected to trigger festive season demand recovery
- Beneficiaries: Voltas, Havells, Amber Enterprises, Blue Star
5. Defence Sector
- GST on armoured vehicles, drones, military aircraft, rescue vessels cut to 0–5%
- Likely to lower procurement costs and improve margins for defence companies
- Beneficiaries: HAL, BEL, Mazagon Dock, BEML
6. Insurance & Healthcare
- Nil GST on health and term life insurance
- Likely to expand insurance penetration and benefit hospitals through higher volumes
- Beneficiaries: HDFC Life, ICICI Prudential, Star Health, Apollo Hospitals
7. Apparel & Footwear
8. Metals, Chemicals & Renewable Energy
- Steel and aluminium remain at 18%, but demand push from autos and durables helps
- Renewable energy equipment like solar, wind, waste-to-energy plants taxed at 5%
- Beneficiaries: Thermax, Triveni Turbine, Praj Industries
Special 40% Slab: Sin & Ultra-Luxury Goods
- Tobacco, pan masala, gutkha, cigarettes now under 40% slab
- Aerated beverages, mid-size and large cars, high-end bikes (>350cc), yachts, private aircraft also in this bracket
- Retail Sale Price (RSP) mechanism introduced for tobacco and pan masala to capture higher revenues
What GST 2.0 Means for Investors
- Consumption Revival – Lower taxes on essentials, FMCG, autos and durables are likely to boost demand during the festive season.
- Healthcare & Insurance Growth – Exemptions will encourage wider adoption, benefiting insurers and hospitals.
- Rural Economy Push – Cuts on tractors, fertilizers and cement should accelerate rural demand and construction activity.
- Defence & Renewable Energy Thrust – Tax cuts will improve margins and accelerate adoption, supporting long-term growth sectors.
- Caution on Sin Goods – Cigarettes, beverages and luxury consumption will remain under heavy taxation, potentially impacting ITC, United Spirits and related players.
Macro View: Why GST 2.0 Matters Now
India’s economy has been holding steady, but one missing link has been broad-based demand growth. GST 2.0 seems designed to fix that gap.
- GDP Growth: Q1 FY26 real GDP grew 7.8% YoY, beating RBI’s forecast of 6.5%. Consumption, which makes up 60% of GDP, will get a fresh boost.
- Inflation: CPI inflation dropped to 1.55% in July 2025, the lowest since 2017. Lower GST on staples will ease prices further.
- Fiscal Deficit: With a target of 4.4% of GDP in FY26, rationalized GST revenues ensure fiscal stability while still allowing consumer relief.
Final Takeaway
India’s economy has strong fundamentals, but broad-based consumer demand has been the missing link. GST 2.0 aims to bridge this gap by reducing taxes on essentials, FMCG, autos and durables, while keeping luxury and sin goods under higher slabs.
For investors, the reform signals opportunities in various sectors, while caution is advised on tobacco, alcohol and ultra-luxury consumption plays.
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