Auto stocks surged on Thursday morning trade, with Mahindra & Mahindra climbing nearly 8 per cent, as small cars and entry-level bikes are set to get cheaper with the GST Council approving a complete overhaul of the tangled Goods and Services Tax regime.
"Given the wide-ranging effect of the measures, many domestic-focused stocks are likely to benefit.
"Some of the key names include: Maruti, M&M, Ashok Leyland, Britannia, Ultratech, JK Cement, Havells, Voltas, Amber, Metro, Trent, LemonTree, Indian Hotels, Niva Bupa, HDFC Life, IGL, Acme Solar, Suzlon, Swiggy, Delhivery, ICICI Bank, HDFC Bank, Bajaj Finance, Shriram Finance," according to a report by Motilal Oswal Financial Services.
The GST Council approved limiting slabs to 5 per cent and 18 per cent effective from September 22, the first day of Navaratri.
Petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm length and diesel vehicles of up to 1,500 cc and 4,000 mm length would move to the 18 per cent rate from the current 28 per cent.
Motorcycles up to 350 cc would be taxed at a lower GST of 18 per cent against 28 per cent currently.
All automobiles above 1,200 cc and longer than 4,000 mm as well as motorcycles above 350 cc and racing cars will be charged with a 40 per cent levy.
Small hybrid cars will also benefit, while EVs will continue to be charged at 5 per cent.
Some of the key sectors that could be key beneficiaries are: insurance, consumer durable, building materials, automobiles, retail, cement, FMCG, and real estate.
Mother Dairy
Mother Dairy on Thursday said it will pass on the benefits of the reduction in GST on a wide range of products to consumers.
Mother Dairy is one of the leading dairy firms in the country.
It clocked a turnover of Rs 17,500 crore in the last fiscal year.
Reacting to the decision of the GST Council, Manish Bandlish, Managing Director of Mother Dairy, said, " We commend the Union Government's decision to reduce GST rates on a wider range of dairy products, including paneer, cheese, ghee, butter, UHT milk, milk-based beverages, and ice creams."
The move would significantly boost the affordability and accessibility of value-added dairy products for consumers.
"This is a particularly big boost for packaged categories, which are fast-growing favourites in Indian homes and will see stronger demand momentum going forward," Bandlish said.
Mother Dairy is committed to ensuring that the advantages of this reform are effectively passed on to the consumers, he assured.
"By lowering the tax slabs, the move will encourage wider adoption of packaged, value-added dairy products, strengthen consumer preference for safe and quality offerings, and enable more families to enjoy wholesome dairy goodness at better value," Bandlish said.
The reduction in GST rates for a wide range of dairy products would create stronger market opportunities for farmers.
Insurance
Announcing the outcome of 56th GST Council meeting, Finance Minister Nirmala Sitharaman on Wednesday said all individual life insurance policies, whether term life, ULIP or endowment policies and subsequent reinsurance are exempt from GST.
In morning trade, shares of Star Health and Allied Insurance Company skyrocketed 9.35 per cent, Niva Bupa Health Insurance Company zoomed 9 per cent, ICICI Prudential Life Insurance Company jumped 5.70 per cent, ICICI Lombard General Insurance Company rallied 5 per cent, Life Insurance Corporation of India climbed 5 per cent, HDFC Life Insurance Company went up 4.90 per cent and SBI Life Insurance Company surged 4.88 per cent on the BSE.
"While the direct beneficiaries include consumer, auto, cement, healthcare and insurance sectors, the second order beneficiaries in terms of growth will be retail banks & NBFCs," Rahul Singh, CIO-Equities, Tata Asset Management, said.
All individual health insurance policies, including family floater policies and policies for senior citizens and reinsurance thereof will also be exempt from GST, she said.
Since its inception in July 2017, GST at the rate of 18 per cent is levied on premium paid towards health insurance and life insurance.
"We will make sure that companies pass on GST rate reduction and make insurance affordable for the common man and increase the insurance coverage in the country," she said.
"Some of the key sectors that stand to benefit from this are insurance, FMCG, automobiles, agriculture equipment, cement, consumer durables, apparel, footwear, QSR, and retail," Pranav Haridasan, MD and CEO, Axis Securities, said.
Salon, gym, yoga centre services to get cheaper
Salon and fitness bills are likely to get cheaper as the GST rate on beauty and physical well-being services, including those at health clubs, salons, barbers, fitness centres, yoga, etc, has been slashed from 18 per cent with Input Tax Credit (ITC), to 5 per cent without tax credit.
Also, daily use products like hair oil, toilet soap bars, shampoos, toothbrushes, toothpaste, too, are likely to get cheaper as taxes on them have been cut to 5 per cent from 12/18 per cent currently.
The new Goods and Services Tax (GST) rate will be effective from September 22.
As part of the rate rationalisation exercise at the 56th meeting of the GST Council, the Centre and states consented to reduce GST from 18 per cent to 5 per cent on beauty and physical well-being services used by the common man, including services of gyms, salons, barbers, yoga centres, etc.
Other daily use items like talcum powder, face powder, shaving cream and aftershave lotion, too, could see the reduction in prices as GST has come down to 5 per cent from 18 per cent.
Issuing a set of FAQs, the finance ministry said the GST rate rationalisation is "intended to lower the monthly expenditure for the lower middle class and the poorer sections of society" and hence, even though toilet soap bar has been slashed to 5 per cent, liquid soaps have been retained at 18 per cent.
To a question on the reason for reducing GST on face powder and shampoos and whether this will benefit MNCs and luxury brands, the ministry said these goods are daily-use items for almost all segments of the population.
"Although expensive face powder and shampoos sold by MNCs or luxury brands will also benefit, the objective of the rate rationalisation exercise is to further simplify the tax structure.
"Administering a tax based on brand or value of cosmetics will create complexity in the tax structure, besides posing challenges for administration," the ministry added.
Similarly, GST has not been reduced on mouthwash, but the tax rate on toothpaste, toothbrush and dental floss has been cut to 5 per cent as these are "in the nature of basic dental hygiene goods".
AMRG & Associates Senior Partner Rajat Mohan said by including health clubs, salons, barbers, fitness centres, and yoga under this concessional bracket of 5 per cent, the government has attempted to reposition personal care and wellness as accessible essentials rather than luxuries.
"From a consumer's perspective, this should bring down costs and expand access to wellness services," he said.
Explaining further, Mohan said a critical issue in this rationalisation is that the new rate comes without ITC.
For service providers with substantial input costs on rent, consultation, consumables, and infrastructure, this means that taxes paid on inputs will no longer be creditable.
This could neutralise part of the consumer benefit, as providers may still embed these costs into their pricing structures, he said.
"This reform is emblematic of a broader 'reboot mode' for the GST economy, a sweeping simplification intended to reset the tax landscape.
Yet, whether the intended benefits fully materialise remains uncertain. Much will depend on whether industry players actually pass on the reduced tax burden to customers.
In the absence of the Anti-Profiteering Authority, ensuring that rate reductions translate into real consumer savings may prove challenging," Mohan said.