GST 2.0: Government’s Big Tax Reset — PL Explains How to Reset Your Portfolio
- 4th September 2025
- 11:30:00 AM
- 5 min read
Summary
The GST Council has cleared GST 2.0, India’s biggest tax reform since 2017, cutting slabs to 5% and 18% with a 40% demerit rate. Prabhudas Lilladher (PL) calls this a portfolio reset opportunity, with FMCG, autos, durables, cement, healthcare and insurance emerging as winners. For investors, GST 2.0 is not just a tax reset—it’s a chance to realign portfolios for growth.
Mumbai | September 4 – The Goods and Services Tax (GST) Council on Wednesday cleared a historic reform package, ushering in GST 2.0, a major simplification of India’s indirect tax system. The restructuring reduces the complex multi-slab system into just two standard slabs of 5% and 18%, while introducing a 40% demerit rate for sin and luxury goods.
Prime Minister Narendra Modi described the reform as “a collective step that will benefit the common man, strengthen MSMEs, and promote ease of doing business.” Finance Minister Nirmala Sitharaman added that except for tobacco and related products, the changes will take effect from September 22, the first day of Navratri.
According to Prabhudas Lilladher (PL), GST 2.0 is more than just a tax change—it is India’s biggest tax reset in eight years. “This is a structural overhaul of GST, not just rate rationalisation. It will lower costs for households, revive consumption, and simplify compliance for businesses,” said Amnish Aggarwal, Head of Research, PL.
Understand what GST 2.0 means for you: GST 2.0 | India’s Biggest Tax Reset Explained
Why GST 2.0 Matters for Investors
The government estimates nearly ₹480 billion in tax savings, much of it channelled back into consumption. By lowering levies on essentials, durables, autos, healthcare, and insurance, GST 2.0 directly boosts disposable income and consumer sentiment. Economists expect a 100–120 bps lift to GDP growth over the next four to six quarters.
For equity markets, this means a broad consumption-led upcycle. PL believes the reform creates a unique opportunity for investors to reset portfolios towards sectors that stand to gain most from higher demand, affordability, and lower working capital lock-ups.
Sectoral Impact and Portfolio Allocation
FMCG & Staples – Everyday Consumption to Surge
Household and FMCG essentials such as shampoos, soaps, toothbrushes, biscuits, coffee, noodles, butter and paneer have shifted into the lower GST slab. With affordability improving, PL expects strong volume growth for consumer staples.
Top picks: ITC, Britannia, Hindustan Unilever, Nestle, Dabur, Marico.
Automobiles – Entry-Level Vehicles and Two-Wheelers Gain
Small cars, motorcycles (≤350cc) and three-wheelers now fall under the 18% slab, compared to 28% earlier. This benefits companies with mass-market portfolios. Tractor GST rates have also been cut, aiding rural demand.
Top picks: Maruti Suzuki, Hero MotoCorp, Bajaj Auto, Mahindra & Mahindra, Tata Motors, TVS Motor.
Consumer Durables – White Goods to See Demand Recovery
GST cuts on air conditioners, dishwashers and large-screen TVs will revive demand in a sector hit by weak summers and high inventory. PL expects festive season sales to benefit strongly.
Top picks: Voltas, Blue Star, Whirlpool, Amber Enterprises.
Cement & Building Materials – Affordable Housing Boost
Cement has moved to 18% from 28%, making construction cheaper. Rural housing demand is likely to rise, with Individual House Builder (IHB) activity picking up.
Top picks: Ultratech Cement, Ambuja Cement, Shree Cement, JK Lakshmi Cement.
Healthcare & Insurance – Cost Relief to Drive Coverage
Exemptions for life and health insurance, along with zero-rated life-saving drugs and diagnostic kits, will improve affordability and coverage. Hospitals will benefit from higher volumes, while insurers may see long-term growth in premiums.
Top picks: Apollo Hospitals, Max Healthcare, HDFC Life, ICICI Prudential Life.
Hotels & Travel – Mid-Market Segment Benefits
Hotels charging less than ₹7,500 per night move into the 5% slab. This is expected to benefit budget hotel chains and boost travel demand during the festive and wedding seasons.
Top picks: Lemon Tree Hotels, Samhi Hotels.
Caution Zones – What to Avoid
Not all segments emerge winners. Online gaming companies face a higher 40% tax, while luxury SUVs, cigarettes, aerated beverages, yachts and private jets are also taxed at the highest slab. Investors should remain cautious about allocating capital to these categories.
PL’s Portfolio Strategy – Reset for Growth
PL sees GST 2.0 as a trigger for broad-based consumption growth, particularly in the mass-market and rural segments. The firm recommends investors tilt their portfolios towards:
- FMCG staples for steady consumption growth.
- Auto and durables for cyclical demand recovery.
- Cement and building materials for housing-led upside.
- Healthcare and insurance for structural, long-term growth.
“The government has brought GST 2.0 as India’s biggest tax reset. For investors, this is also the time to reset portfolios. Sectors tied to consumption, affordability and healthcare will lead the next leg of market growth,” Aggarwal added.
Outlook
GST 2.0 simplifies India’s indirect tax system, lowers costs for households, and provides fresh momentum to industries and services. While the fiscal cost of the reform is modest, the economic gains are expected to be significant.
For markets, the message is clear: this reform is growth-accretive. For investors, the question is sharper still — is your portfolio ready for GST 2.0?
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
