GST reform looms, markets eye the winners

Summary: On Independence Day, Prime Minister Modi remarked that there would be a double Diwali gift for businesses in the form of a much-awaited GST reform. While nobody knows how the reforms will pan out, Motilal Oswal has released a report on its possible impact. Here are the report’s highlights. For years, India’s Goods and Services Tax (GST) has been criticised for being too complicated, too heavy on certain goods, and too uneven in its impact. Now, the government is considering an overhaul that could reshape how Indians spend and how companies price their products. On Independence Day, the government announced its intent to simplify GST and reduce distortions. The official statement, however, stopped short of offering specifics; no tax rates were mentioned. Instead, it promised “next-generation reforms” and a rationalisation of the structure. That has left room for speculation. Multiple media outlets, citing unnamed officials, have reported that the government may move toward a two-slab system of 5 per cent and 18 per cent, with a higher rate of about 40 per cent for luxury and sin goods. None of this has been confirmed by the GST Council. Still, the possibility of lower rates has companies and investors taking notice. A recent report by Motilal Oswal (a financial services firm) maps out the industries (and stocks) that