Source: LiveMint

The Indian stock market jumped over 1.5% on Monday, following the government’s proposal for significant reforms to the complex goods and services tax (GST) system, along with favourable global indicators amid easing geopolitical tensions.

PM Modi declared that “next-generation GST reforms” are set to be introduced by Diwali (October 2025). Analysts believe that the proposed changes, intended to lessen the tax burden on families, are likely to enhance consumption demand and assist in the ongoing recovery of the sector.

Although specific details of the GST overhaul have not been revealed yet, it is anticipated to involve the simplification of GST rates for essential goods and frequently used items.

Reports suggest that the government may abolish the 12% and 28% GST categories, consolidating products into 5% (with 99% of items in the 12% category expected to transition), 18% (with 90% of products in the 28% category likely to shift), and 40% (reserved for luxury and sin goods) categories.

Analysts believe that post-GST reforms, markets are set to focus on consumption-driven sectors such as autos, FMCG, durables, insurance, paints, and logistics, with demand and margin tailwinds in play.

“Key sectors that stand to benefit include:Consumer Staples (through better demand, lower raw material costs), Automobiles (4 wheelers), Cement, Hotels (sub ₹7,500 room rate inventory), Retail (footwear), Consumer durables (mainly RACs), Logistics, Quick Commerce, and EMS (likely better demand for ACs),” said brokerage Motilal Oswal in its report.

Stocks to benefit

According to analysts at Motilal Oswal, Maruti, Tata Motors, and Ashok Leyland are likely to gain in the automotive sector due to the 4Ws being placed in the 28% tax bracket; they should benefit from the reduced GST rate of 18%.

The brokerage anticipates that ICICI Bank, HDFC Bank, and IDFC First Bank will experience advantages in the banking sector. The entire sector is expected to benefit as consumption rises; this will enhance household confidence and increase demand for loans, thus pushing credit growth into double digits in 2HFY26; consumer-focused lenders and credit card companies will see direct benefits.

Among non-banking financial companies, Bajaj Finance is positioned to benefit, as reduced EMI obligations for consumer durables should enhance NBFC lending within this category.

In the cement industry, Ultratech and JK Cement will likely benefit from improved sentiment; a drop in GST from 28% to 18% could result in a decrease in prices by about 7.5% to 8%, although demand may be less sensitive.

In the consumer staples sector, HUVR and Britannia are expected to gain since most items fall under the 18% tax bracket; staple companies tend to benefit from this as several raw materials are taxed at a 12% rate, leading to lower input GST; this segment is crucial for the government’s revival efforts.

Voltas and Havell’s stand to benefit in the Consumer Durable sector, as air conditioners will be subject to a reduced GST of 18% instead of 28%.

In the insurance industry, the brokerage mentioned that Niva Bupa, Max Life, HDFC Life, and Star Health can benefit, particularly since policies for senior citizens currently incur an 18% tax, but there is a chance that this could be lowered to 5% or completely exempted. If this happens, health insurers and those focused on term life policies may see advantages.