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GST 2.0 simplifies slabs, cuts costs & boosts demand. Beyond FMCG, autos & cement, midcaps & smallcaps may emerge as real investor winners.
GST 2.0:Beyond FMCG & autos, real winners may be mid & small caps
India’s latest GST rationalisation, effective September 22, has replaced multiple slabs with a simpler 5% to 18% structure, along with a 40% demerit rate for sin and luxury goods. Analysts say the move could boost consumption, formalise the economy, and improve corporate earnings over the medium term. While investors initially rushed into large FMCG, auto and cement names, the real opportunities may lie in overlooked companies whose balance sheets and margins are more directly influenced by the new regime.
Overlooked and Unique Winners
Bidi Value Chain
Niche players like Sinnar Bidi Udyog and NTC Industries benefit from GST on tendu leaves — the key bidi input — being cut from 18% to 5%. Small bidi makers get immediate cost relief. Unlike cigarettes, now in the 40% slab, bidis remain outside it, offering short-term margin support despite weak profitability and low liquidity in these stocks.
Dairy & Regional Snacks
Lower GST on ghee, cheese and packaged foods favours smaller regional players. Parag Milk Foods, Hatsun Agro, Bikaji Foods and Prataap Snacks are well-placed.
Stationery and Education Supplies
GST cuts on notebooks, pencils and art materials directly help school suppliers. Small caps like DOMS and Navneet may not make headlines, but order books and state tender volumes could see a tangible lift.
Salons and Wellness
Organised players such as Kaya Ltd and VLCC Healthcare stand to gain from cheaper consumables like soaps and oils. Ranjit Jha, CEO of Rurash Financials, told Moneycontrol: “Salons operate on wafer-thin margins. Even small relief matters. Combined with GST exemptions on health insurance, this creates space for households to spend more on wellness services.”
Rural Equipment and Pumps
Relief on tractors, irrigation tools and farm pumps will aid VST Tillers, Shakti Pumps and Escorts Kubota. Cheaper rural capex supports niche equipment makers alongside larger OEMs.
Logistics
Ajjay Bagga, veteran analyst, highlighted that rate harmonisation between rail (earlier 12%) and road (5–12%) removes disparities. Both can now opt for either 5% without ITC or 18% with ITC, levelling the field and encouraging a shift to rail freight. Beneficiaries include Concor and Gateway Distriparks.
Renewables Adjacencies
The GST hike on coal from 5% to 18% improves relative competitiveness for renewables. EPC contractors and turbine makers such as KP Energy and Inox Wind gain as project economics tilt towards cleaner energy.
Insurance & Healthcare
GST exemptions on health and life insurance premiums support penetration in under-served segments. Cuts on life-saving drugs and medical devices (down to 5% or nil) also improve affordability. Insurers like HDFC Life and SBI Life, and healthcare players such as Apollo Hospitals, Max Healthcare and Poly Medicure, stand to benefit.
Misunderstood Opportunities
Cement vs Real Estate
The 28% to 18% GST cut on cement may not translate into big gains for producers. Independent analyst Ambareesh Baliga told Moneycontrol: “The real gain is for developers, who previously absorbed the GST hit; now they keep the saving. Our calculation shows roughly Rs 30 per sq ft benefit in affordable projects.”
Refunds and Working Capital
Companies in textiles, pharma and healthcare have struggled with inverted duty structures. Rohit Beri, CEO & CIO, Arthamoney, said: “Reducing refund delays frees up liquidity and cuts working capital costs. This is a meaningful efficiency gain.”
Autos — Beyond Small Cars
While sub-4m cars and
Clear Negatives to Track
- Varun Beverages: Carbonated and flavoured drinks in the 40% slab face margin pressure.
- Premium Apparel: GST benefit capped at apparel under Rs 2,500; high-end festive wear left out.
- Premium Motorcycles (>350cc): Models from Royal Enfield, Bajaj Triumph, KTM and Hero Harley become less affordable.
Why This Matters for Investors?
The GST reset creates two investible themes. First, margin relief where input costs fall — dairy, diagnostics, renewables equipment. Second, working-capital relief where refunds improve liquidity — textiles, pharma, healthcare. For mid and small caps, this could be a re-rating trigger.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
September 05, 2025, 09:14 IST
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