New Delhi: India’s leading indices Sensex and Nifty have risen by 500 and 150 points, respectively, in early morning trades on September 4 after Finance Minister Nirmala Sitharaman’s GST rates overhaul announcement the previous day. The GST Council has approved the Central government’s proposal to revamp the tax structure for most items to 5 and 18 percent from the earlier 4-tier structure followed since GST was introduced in 2017.
GST rates overhaul: A long-standing demand
Even though the GST was credited with simplifying local taxes, it remained one of the highest rates of indirect taxes in the world, with many products, including cars and most electronics, taxed at unreasonably high rates of 18%, pushing up prices. Businesses have been complaining about the complicated tax structure and the time and costs needed for compliance. This announcement has been a silver lining for India Inc, especially after US President moved ahead with his 50% tariffs on most Indian exports without any concessions.
According to a post on X by the Ministry of Finance, following the announcement, the government aims to implement the next generation of GST reforms, as announced by PM Narendra Modi in his Independence Day speech.
👉 Recommendations of the 56th Meeting of the GST Council held at New Delhi, today
👉 Next-generation GST reforms, as announced by Prime Minister Shri Narendra Modi from the ramparts of Red Fort on 15th August 2025, represent a strategic, principled, and citizen-centric… pic.twitter.com/yB3VioJccJ
— Ministry of Finance (@FinMinIndia) September 3, 2025
What to expect?
Most analysts and industry insiders are upbeat about this development, especially before the Diwali festive season.
“GST cut will boost consumption, formalisation, and unleash festive cheer. If (US President Donald) Trump drops the punitive 25 per cent tariffs in addition, we may be setting up for a very remarkable Santa Claus rally for the Indian markets,” Ajay Bagga,a finance market expert, told news agency ANI.
“The Indian stock market is poised to embrace the proposed GST reforms, streamlining tax slabs to 5% and 18%. This reduction, especially from the 12% and 28% brackets, is expected to spur consumer demand ahead of the festive season, benefiting sectors like consumer durables, automobiles, and FMCG. However, stocks in these sectors have already surged in anticipation.” Santosh Meena, Head of Research at Swastika Investmart, says.
“The current GST reforms are a significant step towards a more unified and streamlined economy. By easing the tax burden on consumers and simplifying the overall market, they are designed to stimulate demand and foster a transparent business environment. ” Hemant Sapra, President, Global Sales & Marketing, KARAM Safety adds.
Who gains and until when?
The markets may be cheering, but this may not mean lower prices for consumers.
“The tax cut supports consumption-driven growth, but its success hinges on companies passing on savings to consumers. Markets will also factor in the long-term impact on government revenue and the broader economy,” Santosh cautions.
After PM Modi’s ‘Diwali gift’ GST rate cut announcement on Independence Day, many consumers have postponed their purchases, slowing down demand across categories that could benefit from lower taxes.
According to estimates by Grant Thornton, this untimely announcement could have a 25-30% impact on sales of high-ticket electronics like air conditioners and refrigerators till the new rates are implemented. Auto dealers are also complaining of delayed sales in anticipation of rate cuts.
Even though this is a step in the right direction, many analysts have criticised the government for timing the announcement wrongly, especially as Diwali falls on October 21 this year, much earlier than usual. Till then, consumption is unlikely to pick up, and companies will be forced to offer deep discounts to clear their inventory backlog.
