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GST 2.0 reform - cut in tax rate to boost daily discretionary consumption

ICICIdirect Research 22 Aug 2025 DISCLAIMER

FMCG – Packaged foods and Dairy products
In packaged foods segments items such as snacking item ready for consumption, nuts & dry fruits and packaged fruit juices are currently bracket under 12% GST rate.
In dairy segments, products such as ghee, cheese, butter, condensed milk and beverages (containing milk) are currently taxed under 12% GST rate. Cut in GST rate will lead to reduction in product price resulting in improvement in the sales volume going ahead.
Key beneficiaries: Tata Consumer Products, Dabur, Nestle, Dodla Dairy and Hatsun Agro
 
Discretionary – Apparels and Footwear to benefit
In apparel segment, GST rate of 12% is charged on garments above Rs.1,000/pc, while in the footwear segment, GST rate of 12% is charged on footwear of sale value not exceeding Rs.1000/pair. 
We expect GST rate on Apparels (> Rs.1000/pc) and Footwears (<= Rs.1,000/pair) to reduce to 5%. This will benefit apparels and footwear companies as it will not only improve the consumption but will also help in competing with regional/non-branded players available in the domestic market.
Key Beneficiaries: Trent, Arvind Fashion, Relaxo Footwear, Bata India
 
Hospitality: Hotels to benefit by moving to lower GST tax slab of 5%
Hotel rooms priced in the range of Rs.1,000-7,500 per night are likely to come under 5% tax slab from 12% currently. Further, the industry will be indirect beneficiary of reduction in GST rates on cement and other products from the perspective of some benefit in capex per room.
The GST rate on airline business class is 12% which could be moved to lower tax slab of 5%. Increase in business travel will indirectly drive demand for hotel companies.
Key Beneficiaries: Lemon Tree Hotels, Indian Hotels, ITC Hotels, Chalet hotels
 
Consumer Durables & EMS – GST cut could aid revival in consumer durable space
Consumer durables industry currently faces a higher tax burden on select categories, with ACs, TVs (>32”), and dishwashers taxed at 28% GST, while most other appliances such as washing machines, refrigerators, ceiling fans, water purifiers and mobile phones attract 18% GST.
A potential rate cut could translate into an immediate price correction of ~8–9%, likely aiding demand revival across consumer durables products.  
Air-conditioners which are currently taxed at 28% and being under-penetrated at 7-8% are expected to be key beneficiaries over medium to long term. Currently ACs segment is going through a rough phase with elevated inventories, given the weak summer season. GST-led price correction could act as a catalyst for inventory liquidation during the upcoming festive season, easing supply chain pressures and supporting primary sales momentum.
Key Beneficiaries: Blue Star, Voltas, Crompton Greaves consumer, Dixon Tech, Amber Enterprises, Syrma.

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