🚨 Prime Minister Narendra Modi has announced a “Double Diwali Gift” for the nation.
India is preparing the next generation of GST reforms.
➝ 12% & 28% slabs to be rationalised
➝ MSMEs to get significant relief
➝ Everyday essentials likely to become more affordable
Most countries adjust taxes quietly.
India is positioning GST reform as a growth accelerator.
But here’s the caution:
If corporates raise MRPs, GST cuts may not fully reach consumers.
With 60% consumption-driven GDP, a ₹1 lakh crore MSME push, and a simpler 2-slab system…
This is how India’s GST reform could reshape the economy 🧵👇
India is preparing the next generation of GST reforms.
➝ 12% & 28% slabs to be rationalised
➝ MSMEs to get significant relief
➝ Everyday essentials likely to become more affordable
Most countries adjust taxes quietly.
India is positioning GST reform as a growth accelerator.
But here’s the caution:
If corporates raise MRPs, GST cuts may not fully reach consumers.
With 60% consumption-driven GDP, a ₹1 lakh crore MSME push, and a simpler 2-slab system…
This is how India’s GST reform could reshape the economy 🧵👇
What you’ll learn in this thread:
1. Why GST reform was inevitable in 2025
2. The economics of “slab compression” (4 ➝ 2)
3. Sector-by-sector impact (cement, autos, MSMEs, insurance)
4. The hidden “Pass-Through Problem” (MRP hikes)
5. The long-term vision for India’s $5T economy
1. Why GST reform was inevitable in 2025
2. The economics of “slab compression” (4 ➝ 2)
3. Sector-by-sector impact (cement, autos, MSMEs, insurance)
4. The hidden “Pass-Through Problem” (MRP hikes)
5. The long-term vision for India’s $5T economy
📢 Before we begin…
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1. The GST Arc of History
2017 ➝ GST unified 17 state & central taxes.
2025 ➝ After 8 years, cracks emerged: multiple slabs, inverted duties, compliance costs.
Principle: Complex taxes distort growth. Simpler taxes boost compliance.
2017 ➝ GST unified 17 state & central taxes.
2025 ➝ After 8 years, cracks emerged: multiple slabs, inverted duties, compliance costs.
Principle: Complex taxes distort growth. Simpler taxes boost compliance.
2. The Reform’s Core
India moves from 4 slabs ➝ 2 slabs:
➝ 5% for essentials
➝ 18% for most goods/services
Global best practice: most nations run with 1–2 VAT/GST rates. India finally converges.
India moves from 4 slabs ➝ 2 slabs:
➝ 5% for essentials
➝ 18% for most goods/services
Global best practice: most nations run with 1–2 VAT/GST rates. India finally converges.
3. Why Diwali 2025?
Timing is strategic:
➝ Domestic demand = 60% of GDP
➝ Global slowdown & US tariffs hurting exports
➝ Inflation <5% ➝ fiscal space
➝ Elections in major states ➝ political window
Timing is strategic:
➝ Domestic demand = 60% of GDP
➝ Global slowdown & US tariffs hurting exports
➝ Inflation <5% ➝ fiscal space
➝ Elections in major states ➝ political window
4. Everyday Impact
Cement ➝ 28% to 18% (housing & infra boost)
Two-wheelers ➝ 28% to 18% (mobility push)
Insurance ➝ 18% to 5% (financial inclusion)
Electronics ➝ 28% to 18% (middle-class affordability)
This is targeted stimulus, not random cuts.
Cement ➝ 28% to 18% (housing & infra boost)
Two-wheelers ➝ 28% to 18% (mobility push)
Insurance ➝ 18% to 5% (financial inclusion)
Electronics ➝ 28% to 18% (middle-class affordability)
This is targeted stimulus, not random cuts.
5. The MSME Equation
MSMEs = 30% of GDP, 48% of exports, 11 crore jobs.
Reforms bring:
➝ Pre-filled returns
➝ Faster refunds
➝ Input-output parity
This reduces working capital stress by 15–20% ➝ more jobs & expansion.
MSMEs = 30% of GDP, 48% of exports, 11 crore jobs.
Reforms bring:
➝ Pre-filled returns
➝ Faster refunds
➝ Input-output parity
This reduces working capital stress by 15–20% ➝ more jobs & expansion.
6. The Multiplier Effect
Every ₹1 reduction in GST on cement lowers infra costs by ~0.3–0.4%.
Cheaper housing ➝ more demand ➝ more jobs.
This blends Keynesian demand creation with supply-side relief.
Every ₹1 reduction in GST on cement lowers infra costs by ~0.3–0.4%.
Cheaper housing ➝ more demand ➝ more jobs.
This blends Keynesian demand creation with supply-side relief.
7. The Hidden Risk
Economic theory: “Tax cuts boost demand.”
But India faces the Pass-Through Problem.
If corporates raise MRPs, consumers don’t feel the benefit.
Economic theory: “Tax cuts boost demand.”
But India faces the Pass-Through Problem.
If corporates raise MRPs, consumers don’t feel the benefit.
8. The Pass-Through Math
Old: ₹100 item + 18% GST = ₹118
New: ₹100 + 5% GST = ₹105
If MRP rises to ₹110 + 5% = ₹115
➝ Savings shrink from ₹13 to ₹3
A 77% leakage of benefit.
Old: ₹100 item + 18% GST = ₹118
New: ₹100 + 5% GST = ₹105
If MRP rises to ₹110 + 5% = ₹115
➝ Savings shrink from ₹13 to ₹3
A 77% leakage of benefit.
Do you think corporates will fully pass GST cuts to consumers?
9. Elasticity Matters
➝ Competitive sectors (electronics, autos): likely to pass benefits.
➝ Oligopolistic sectors (cement, FMCG): may retain benefits.
India’s consumption gain depends on sector-level pricing power.
➝ Competitive sectors (electronics, autos): likely to pass benefits.
➝ Oligopolistic sectors (cement, FMCG): may retain benefits.
India’s consumption gain depends on sector-level pricing power.
10. Fiscal Math
67% of GST revenue comes from the 18% slab.
Merging slabs is fiscally safe.
Short-term revenue dip ➝ offset by higher demand ➝ long-term buoyancy.
67% of GST revenue comes from the 18% slab.
Merging slabs is fiscally safe.
Short-term revenue dip ➝ offset by higher demand ➝ long-term buoyancy.
11. Sectoral Winners
1. Real Estate ➝ Cement cheaper ➝ housing costs -8–10%
2. Autos ➝ Small cars & bikes cheaper by 7–10%
3. Electronics ➝ ACs/TVs down 5–8%
4. Insurance ➝ Premiums cheaper ➝ higher penetration
5. Healthcare & Education ➝ Low/NIL slabs retained
1. Real Estate ➝ Cement cheaper ➝ housing costs -8–10%
2. Autos ➝ Small cars & bikes cheaper by 7–10%
3. Electronics ➝ ACs/TVs down 5–8%
4. Insurance ➝ Premiums cheaper ➝ higher penetration
5. Healthcare & Education ➝ Low/NIL slabs retained
12. Global Lens
EU average VAT ➝ 21% flat
China VAT ➝ 13%
India ➝ 5% + 18%
This hybrid balances growth with fiscal prudence.
Improves Ease of Doing Business & investor perception.
EU average VAT ➝ 21% flat
China VAT ➝ 13%
India ➝ 5% + 18%
This hybrid balances growth with fiscal prudence.
Improves Ease of Doing Business & investor perception.
Which sector benefits you most from GST Reform 2025?
13. The Strategic Angle
Global trade wars are reshaping supply chains.
India needs domestic demand as buffer.
GST reform = stimulus without fiscal deficit blowout.
Global trade wars are reshaping supply chains.
India needs domestic demand as buffer.
GST reform = stimulus without fiscal deficit blowout.
14. Viksit Bharat Context
PM Modi frames reform not as a concession, but as a pillar of India’s 2047 vision.
Signals policy continuity ➝ this is reform-as-strategy, not election populism.
PM Modi frames reform not as a concession, but as a pillar of India’s 2047 vision.
Signals policy continuity ➝ this is reform-as-strategy, not election populism.
15. The Consumer Checklist
After Diwali, track:
➝ MRP vs GST bills
➝ Cement & auto prices
➝ Insurance premiums
Consumer vigilance will decide if benefits are real.
After Diwali, track:
➝ MRP vs GST bills
➝ Cement & auto prices
➝ Insurance premiums
Consumer vigilance will decide if benefits are real.
16. The Truth
If pass-through is full ➝ GDP +0.5%, demand surge.
If not ➝ corporate margins rise, households stagnate.
Both outcomes reshape distribution of growth.
If pass-through is full ➝ GDP +0.5%, demand surge.
If not ➝ corporate margins rise, households stagnate.
Both outcomes reshape distribution of growth.
17. The Bottom Line
GST Reform 2025 isn’t cosmetic.
It’s India’s most important domestic-demand lever in 8 years.
Handled well ➝ accelerates India toward $5T economy.
Handled poorly ➝ risks becoming a corporate subsidy.
GST Reform 2025 isn’t cosmetic.
It’s India’s most important domestic-demand lever in 8 years.
Handled well ➝ accelerates India toward $5T economy.
Handled poorly ➝ risks becoming a corporate subsidy.
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📜 SEBI Compliance
This thread is shared by CA Vivek Khatri, partner at Stockizen Research, a SEBI Registered Research Analyst (INH000017675 | BSE/RA/25072024/6309).
This is only for educational use. No part of it is investment advice.
“Investment in securities market is subject to market risks. Read documents carefully.”
We hold no financial interest or 1% ownership in companies mentioned.
🔗 stockizenresearch.com/disclaimer
This thread is shared by CA Vivek Khatri, partner at Stockizen Research, a SEBI Registered Research Analyst (INH000017675 | BSE/RA/25072024/6309).
This is only for educational use. No part of it is investment advice.
“Investment in securities market is subject to market risks. Read documents carefully.”
We hold no financial interest or 1% ownership in companies mentioned.
🔗 stockizenresearch.com/disclaimer
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