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Reactions to India's reduction of consumption tax on hundreds items

India announced on Wednesday that it would reduce taxes on hundreds of items, from soaps to cars, to boost domestic demand. It also simplified the complicated structure of its goods and services tax to just two rates, from four. There were some exceptions, however, for luxury goods and "sin goods".

Early sessions saw the benchmark BSE Sensex (BSE index) and Nifty 50 rise by 0.8% each.

Here's how the industry has responded so far:

ANISH SHAH, GROUP COOPERATIVE & MD MAHINDRA GROUP

"The next-generation GST Reforms... mark an important moment in India's quest to build a simpler and fairer tax system that is more inclusive.

Mahindra views these reforms in a transformative way. These reforms simplify compliance, increase affordability, and energise the consumption while allowing industry to invest more confidently."

SAURABH AGAWAL, PARTNER, AUTOMOTIVE TASKS LEADER AT EY INDIA

The rationalization of GST on automobile vehicles and parts has been a welcome and significant change. This move, which makes vehicles more affordable in all segments will boost consumer spending and simplify the complex classification disputes that have plagued the industry for years.

SAMIR SHAH, EXECUTIVE DIR. & CFO HDFC ERGO GENERAL INSURANCE COMPANY

"The GST Council's decision to exempt health insurance for individuals from GST is an important development. This decision is in line with the regulator's broader goal of "Insurance for All By 2047", and represents a significant step forward.

It is expected that the premiums will decrease due to the lower taxes. However, the exact amount of this reduction will depend on the availability of input tax credits, which we will learn more about in the next few days."

NILESH SHAH, MANAGING DIRECTOR, KOTAK MAHINDRA ASSET MANAGEMENT CO

The GST announcement reduces inflation, increases consumer sentiment, does not disturb fiscal consolidation, and improves the ease of doing business. It also partially offers negative effects of tariffs.

SHAILESH CHANDRA PRESIDENT, SOCIETY FOR INDIAN AUTOMOBILE MANUFACTURERS

This timely move will bring new energy to the Indian automotive sector and bring cheer to consumers. These announcements, which will make vehicles more affordable for first-time buyers, middle-income families and those in the entry-level segments, will benefit them greatly.

C S VIGNESHWAR PRESIDENT, FEDERATION OF AUTOMOBILE DELIVERERS ASSOCIATIONS

"The 56th GST Council Meeting marks a watershed for India's automotive retail industry. This is a bold step that will increase affordability, stimulate demand and strengthen India's mobility eco-system.

"There may be a need for clarification on the levy of cess and how it is treated in dealer's books. This will ensure that there are no ambiguities during transition."

SANJEEV ASTHANA, CEO, PATANJALI FOODS LIMITED.

"At Patanjali Foods we are committed to passing these benefits on to our customers. This initiative not only will increase FMCG penetration in urban and rural India, but it will also act as catalyst for wider economic revival by boosting consumption and supporting related sectors.

This reduction will benefit our categories like ghee soaps, biscuits and noodles, honey and chyawanprash."

RADHIKA RAO IS A SENIOR ECONOMIST IN THE DBS BANK OF SINGAPORE

The lower GST rate will have a positive impact on growth in the second and third quarters of this year, as well as FY27. It will also improve operational efficiency and expand the formal economy.

GARIMA KAPOOR ECONOMIST INSTITUTIONAL EQUITIES ELARA SECURITIES MUMBAI

We expect GST-related demand boost to add between 100 and 120 bps to GDP growth in the next 4-6 quarters. This will nullify the negative impact on exports to US. We remain positive on the increase in consumer demand as multiple policy levers are now favourable for the very first time in over a decade.

SHRIPAL SHAH is the MD & CEO of KOTAK SECURITIES

The GST rate reductions are timely, as they come just before the holiday season and in the context of US tariff disputes. Consumers will have more money to spend on essentials such as FMCG, autos and concrete.

It should boost the demand and help businesses and traders see more volume. The earnings for next quarter may also be boosted. This could also help to reduce inflation. It will depend on how quickly the companies can pass these benefits onto their customers.

DEVARSH VAKIL HEAD OF PRIME RESEARCH HDFC SECURITIES

The GST reforms are a paradigm shift towards economic rationality. Rate reductions for essentials such as dairy, medicine, and food directly benefits consumers because of their inelastic nature.

These reforms are a combination of RBI rate cuts, income tax rebates for FY26, and a moderated inflation. They create multiple stimuli to stimulate consumption and economic growth."

(source: Reuters)