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Consumer Discretionary – Apparels, Footwear, Hotels, Consumer durables

ICICIdirect Research 05 Sep 2025 DISCLAIMER

Apparels and Footwears priced up to Rs.2,500 per garment/pair will be charged 5% GST, which was earlier limited to Rs.1,000 per garment/pair. This will help the companies to compete well with the unorganised players and might also see pick-up in volumes in the upcoming festive season.

Reduction in GST rate on Pizza breads, bakery items and dairy products such as Cheese, butter and paneer will lead to lower procurement cost for QSR companies and will reduce stress on the margins in the quarters ahead.

Hotels industry is under limelight as sustenance of high room demand is aiding the hotel companies to drive double digit RevPar growth for past few quarters. Government has slashed GST rate on rooms up to Rs.7,500 per room to 5% without input tax credit (ITC) from earlier 12% with ITC. This help improving the demand for business and mid-premium hotel rooms in the coming years.

Government of India has announced significant GST rate cuts across key consumer durable categories to stimulate demand and improve affordability. Consumer durable products earlier taxed at 28%—including air conditioners, televisions (>32 inches), monitors, projectors, and dishwashers—will now attract 18% GST. This move is expected to trigger a pick-up in demand for premium and energy-efficient appliances, providing a timely boost ahead of the festive season.

Further room air conditioner (RAC) industry, which witnessed a ~30% YoY decline in Q1FY26 due to unseasonal rains and early monsoons, has been grappling with elevated inventory at both channel and company level. This tax cut is expected to accelerate inventory clearance, support festive sales, and benefit the value chain.

Similarly, television sales, which have been under pressure with ~5–6% de-growth over the past two years, stand to gain from improved affordability. Aided by these reforms consumers could save in range of ~8 -9% over various TV models. This will likely benefit players such as Dixon, which has faced persistent de-growth in its TV manufacturing segment.

In addition, GST on kitchen utensils made of aluminium, steel, iron, and copper has been reduced from 12% to 5%, creating further tailwinds for the kitchenware segment and benefitting companies like Crompton Greaves which through its subsidiary “Butterfly Gandhimathi” has a significant presence in kitchen and cookware segment.

 Collectively, these measures are expected to enhance consumer affordability, spur discretionary spending, and aid consumption recovery across categories. Over the medium to long term, GST rationalisation will act as a structural catalyst for deeper penetration of consumer durables, supporting both branded players and EMS players in the ecosystem.

Top Bets in Discretionary space: Trent (BUY, Target Price: ₹6,350), ITC Hotels (BUY, Target price: ₹282) and Lemon Tree Hotels (BUY, Target price: ₹185), Dixon Technologies (Buy Target price: Rs 20,000) and Crompton Greaves (Buy Target price: Rs 405)

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