According to a report, the government’s announcement of broad GST rate reduction will significantly boost India’s consumption story.
The global financial services business Bernstein has presented a positive outlook for industries such as grocery retail, fast-food chains, footwear, and quick-service restaurants (QSRs) in its most recent study.
The largest surprise, according to Bernstein, was the steep reduction in GST on household and personal care products like toothpaste, shampoos, hair oils, soaps, and powders.
These products now only have a 5% tax instead of the previous 12–18%. According to the research, this action will benefit FMCG companies right now because it will allow them to keep a bigger portion of customer spending.
Medium-term demand may increase as a result of this, either because customers will have more money to spend on other things or because product packs would be larger.
Quick-commerce businesses and grocery stores like DMart, Vishal Mega Mart, and Star (part of Trent) should benefit greatly from these developments.
The GST rate has also been changed for the clothing and footwear industry. Previously, garments costing less than Rs 1,000 were subject to 5% GST, while those costing more than Rs 1,000 were subject to 12% tax.
GST was 12% on footwear under Rs 1,000 and 18% on footwear over Rs 1,000.
Clothing and shoes that cost between Rs 1,000 and Rs 2,500 will now only be subject to 5% tax.
The GST rate was formerly 12 percent for clothing costing more than Rs 2,500, while it is now 18 percent for footwear costing more than Rs 2,500.
According to Bernstein, this is a good development for businesses like Trent, which derives around 30% of its income from goods costing more than Rs 1,000.
Due to the fact that many of their items are inside this price range, Aditya Birla Lifestyle Brands Limited and ABFRL will also profit.
The new GST system will also have an effect on shoe shops including Liberty, Campus, and Metro.
Another significant beneficiary of the pricing reductions is quick-service eateries. There is now less GST on essential inputs like cheese, butter, ghee, margarine, sauces, and packaging materials.
All GST on QSRs’ inputs immediately raises their expenses because they are not eligible for input tax credits. Therefore, any decrease instantly increases their margins.
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