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Reform agenda gains momentum: GST 2.0 to boost consumption

ICICIdirect Research 22 Aug 2025 DISCLAIMER

The government has proposed GST 2.0 reforms which aims to rationalize the current multi-slab structure into a simpler framework, with two main rates of 5% and 18%, and a higher 40% slab for luxury and sin goods.
Aim is to make products more affordable domestically and is likely to boost consumption especially amidst approaching festive season.
All essential products required for daily needs are proposed to be taxed at the lower tariff rate of 5% from ~12% presently.
The official notification is awaited & expected around/before Diwali’25.
Key beneficiaries: Automobiles, FMCG (Packaged foods, Dairy products), Discretionary (Apparels, Hotels, AC’s), Cement & Insurance
Encouragingly, at the meeting held recently, Group of Ministers have approved the GST 2.0 reform and is now likely to be discussed within the GST council in early September.
Since consumers are now aware of the potential reduction in prices, there exists a potential short-term deferment of demand in lieu of GST rate cut expectation. The sooner is gets finalized, the better it is for the industry.

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