News Brief
Auto, FMCG Stocks Rally As GST Cut Buzz Lifts Market Mood; Rate Review Likely Before Deepavali
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Shares of automobile and consumer goods companies surged on Monday (18 August) amid rising expectations of a Goods and Services Tax (GST) rate cut that could make cars, two-wheelers, air-conditioners, refrigerators and daily-use items cheaper.
Investors are betting on a demand boost after reports that the Centre has proposed rationalising GST rates, moving several consumer durables and small cars from the highest 28 per cent slab to 18 per cent, The Hindu reported.
The proposal was submitted to the Group of Ministers (GoM) on Rate Rationalisation, headed by Bihar Deputy Chief Minister Samrat Choudhary, ahead of Prime Minister Narendra Modi’s Independence Day announcement on tax reforms.
Citing an official, TH reported that the changes are part of a broader plan to simplify GST into effectively three slabs: 5 per cent for essential goods, 18 per cent for most items, and 40 per cent for demerit or “sin” goods such as cigarettes, alcohol, online gaming, aerated drinks and luxury cars.
The official said that this is not just a rejig of rates but a comprehensive review to make GST compliant with its original intent of being a simple, single tax.
Apart from rate changes, the compensation cess imposed during Covid to offset state revenue losses could also be scrapped as early as December, once the Centre repays its borrowings.
While a short-term revenue dip is possible, the government expects higher consumption to offset losses.
Market sentiment has already turned bullish, with auto and FMCG stocks leading the rally on hopes of festive season demand getting a further lift from lower taxes.
