GST Council meetings in September and the possible GST reforms:

GST Council meetings in September and the possible GST reforms:

Prime Minister Narendra Modi on Monday chaired a high-level meeting, which included top Union ministers, secretaries and economists, to deliberate on the roadmap for next-generation reforms, one of the key announcements he had made in his August 15 address  Goverment moves ahead with the two-slab GST structure (5% and 18%), it will have multiple short-, medium-, and long-term effects on businesses, consumers, and the economy, Being branded as a “Diwali gift” is meant to resonate with middle-class voters ahead of elections. Over time, it may strengthen GST’s image as a “Good and Simple Tax”, fulfilling the original promise

Proposed GST Rate Changes

Two-Wheelers (2-W)

• Current: 28% GST on <350cc bikes/scooters
• Proposed: 18% GST
• Direct 10% cut, making scooters, commuter bikes (Splendor, Activa, Pulsar 150 etc.) cheaper by ₹6,000–₹10,000 on-road

Small Cars (Below 1200cc Petrol / 1500cc Diesel, Under 4m length)

• Current: 28% + cess (1–3%) = ~29–31%
• Proposed: Flat 18% GST (no cess)
• Cars like Maruti Swift, WagonR, Hyundai i10, Tata Tiago, Baleno may get ₹50,000–₹90,000 cheaper.

Hybrid Cars (PVs) :

• Current: 28% + 15% cess = 43%
• Proposed: 18% GST
• Huge benefit for Toyota Hyryder, Honda City Hybrid, Maruti Grand Vitara Hybrid — could be ₹2–3 lakh cheaper.
• Big Cars, Luxury Cars, SUVs : No change proposed → will continue under the highest GST + cess bracket (43–50%).

In summary Current Tax Rates on Cars (GST + Cess = Total Tax %)

• Electric Cars → 5% (no cess) ✅ lowest
• Small Petrol Cars (up to 4m, ≤1,200cc) → 28% + 1% = 29%
• Small Diesel Cars (up to 4m, ≤1,500cc) → 28% + 3% = 31%
• Cars up to 1,500cc (bigger than small hatchbacks) → 28% + 17% = 45%
• Cars above 1,500cc → 28% + 20% = 48%
• SUVs (above 4m / 1,500cc / >170mm ground clearance) → 28% + 22% = 50% ❌ highest
• Hybrid Cars (above 4m / 1,200cc petrol or 1,500cc diesel) → 28% + 15% = 43%

GST Council Meetings (September 2025)

Each meeting is expected to be 2 days long. & will likely set the stage for GST 2.0 reforms. The following possible reforms on the table are mentioned here under :

1. 12% Slab to Go

• • GST currently has 5%, 12%, 18%, 28% slabs.
  • Removing the 12% slab means merging items into 5% or 18% → simplifies structure.

2. GST Rate Rationalisation for Health & Life Insurance

• • Currently taxed at 18% → makes policies costly.
  • Likely reduction to 12% or 5% to promote wider adoption.

3. Overall Rate Rationalisation of Essential Items

• • Key household essentials may shift to lower GST brackets.
  • Aim: reduce consumer burden + boost demand.

4. Easing Out Blocked Credits

• • Businesses often face ITC (Input Tax Credit) blockages → impacts cash flow.
  • Reforms may allow seamless credit flow, improving liquidity for SMEs/MSMEs

5. Clarifications on Pending Classification Issues

• • Many disputes arise on the classification of goods & services (e.g., snacks vs. biscuits, IT services vs. software products). GST Council may issue clear guidelines to avoid litigation. These GST September meetings could be transformational, not just incremental. Main goel is to Simplify the GST structure, cut rates on key sectors (insurance, essentials), boost compliance, and fuel consumption demand. This aligns with PM Modi’s “GST Reforms 2.0” & Double Diwali promise.

Summary Table

Total Impact on Indian Market Outlook – Fiscal & Policy Considerations

• Revenue loss: ~$20 billion annually. Offset by higher consumption, stronger compliance, easier administration. Requires Centre State coordination (cooperative federalism). So 40+ stocks expected to benefit from GST Reforms 2.0 span across auto, cement, FMCG, banking, and consumer durable sectors.

• Challenges : Companies may not pass full benefit → instead may boost margins. Rising input costs (steel, semiconductors, logistics) may blunt consumer savings & Short-term revenue strain for Centre & states.

Why the Cut Matters:

• Currently, small cars (29–31%) are taxed almost at luxury levels.
• Proposal: Cut small car GST to 18% (from 28%) → would bring effective rate down to ~18–19% (vs 29–31% now).
• This could make entry-level hatchbacks & compact sedans 10–12% cheaper, boosting demand amid weak sales.
• Game changer for mass-market 2-W & small cars → boosts middle-class affordability.
• Hybrid push → aligns with India’s green mobility agenda, making hybrids far more attractive.
• Luxury/SUVs stay expensive → protects govt revenue & avoids giving tax relief to premium buyers.
• Festive-season demand boost expected if proposals are cleared by early October GST Council meet.
• Auto & Two-Wheelers (lower GST on small cars & 2-wheelers) like Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Hero MotoCorp, Bajaj Auto, TVS Motor
• Cement (rate cut from 28% → 18%) like UltraTech Cement, Shree Cement, ACC, Ambuja Cements, Dalmia Bharat, Ramco Cement
• FMCG (reduced GST on packaged food & essentials) : like Hindustan Unilever (HUL), ITC, Nestlé , ndia, Dabur, Britannia, Marico, Colgate-Palmolive
• Consumer Durables (ACs, TVs, electronics moving to lower slab) like Voltas, Blue Star, Whirlpool, Havells, Crompton Greaves, Dixon Technologies.
• Banking & Financials (consumption-led credit growth) like HDFC Bank, ICICI Bank, SBI, Axis Bank, Kotak Mahindra Bank, Bajaj Finance.
• Retail & E-commerce like Avenue Supermarts (DMart), Trent, Aditya Birla Fashion & Retail,
• Analysts expect higher consumption demand post-reforms, boosting volumes for autos, cement, FMCG, and consumer goods. Banks & NBFCs stand to gain from increased retail lending. The move is seen as a short-term consumption booster and a medium-term tax simplification reform.

• • In short: Short-term = consumption boom + market rally,
  • Medium-term = tax simplification, and
  • Long-term = compliance & growth if revenue gap managed well.