Synopsis:
FMCG and healthcare stocks are in focus following the announcement of new GST reforms, which have reduced tax rates on several everyday products as well as numerous life-saving drugs and medical devices.
Several sectors are expected to gain attention following the recent GST cut, as the lower tax rates are likely to stimulate demand, drive higher volumes, and lift overall consumer sentiment. Healthcare and FMCG stocks, in particular, are in focus, with the move seen as a positive catalyst for companies in these industries. It is expected to support revenue growth, strengthen margins, and encourage greater spending on both essential and discretionary products, further boosting the sector’s outlook.
What is GST 2.0, and what reforms have been introduced?
India’s GST 2.0 reforms are a significant change to the tax system, making it simpler, cheaper, and easier to administer. Instead of having multiple tax rates (5 percent, 12 percent, 18 percent and 28 percent), there will be two main rates: 5 percent for necessities and 18 percent for most other goods and services, with a 40 percent rate for luxury and sin products.
Many everyday products, home appliances, farm tools, and even some insurance plans will now be less expensive, allowing families to save money while increasing demand in industries such as automobiles, consumer goods, electronics, and healthcare.
These reforms also make things easier for businesses. There will be a single monthly return, Aadhaar-based registration, automatic credit matching, faster refunds, and a national tribunal to settle tax disputes more quickly.
Starting September 22, 2025, GST 2.0 is expected to boost the economy, increase holiday shopping, and assist small and medium-sized businesses by reducing paperwork and improving cash flow.
FMCG Sector
Essential everyday products have also become cheaper with a GST cut. Items like hair oil, shampoo, toothpaste, soaps, toothbrushes, shaving cream have seen tax rates reduced from 18 percent to 5 percent, while butter, ghee, cheese, dairy spreads, pre-packaged snacks, utensils, feeding bottles, baby diapers, and sewing machines have all seen rates drop from 12 percent to 5 percent. This is expected to reduce household expenses and boost consumer demand.
As a result, shares of Britannia Industries, Dabur India, Colgate-Palmolive, Emami, Hindustan Unilever, and Nestle India have seen a positive movement, as the GST reduction is expected to drive higher sales volumes, improve margins, and boost overall demand for their products.
Meanwhile, companies such as Bikaji Foods International, Mother Dairy, Amul, and others are likely to lower product prices, passing on the benefits to consumers and further supporting demand growth.
Brokerages View
Goldman Sachs and UBS expect the GST reduction to be a strong growth driver for the FMCG sector, boosting consumption, encouraging a shift from unbranded to branded goods, and allowing for faster volume expansion.
Morgan Stanley and UBS have predicted clear winners, including Britannia, Nestle, Dabur, Colgate, and Hindustan Unilever (HUL). Meanwhile, Jefferies is looking for more information on ITC’s compensation cess, which could have a significant impact on the company’s outlook.
Healthcare Sector
GST on healthcare-related products and services has been reduced to make medical care more affordable. Individual health and life insurance now have no GST at all, while items like thermometers have seen a drop in GST from 18 percent to 5 percent, and other items like medical-grade oxygen, diagnostic kits, reagents, glucometers, test strips, and corrective spectacles have all been reduced from 12 percent to just 5 percent. This change will lower treatment and testing costs for patients.
Finance Minister Nirmala Sitharaman announced that GST on 33 life-saving drugs has been reduced from 12 percent to zero, while other essential medicines, health products, and certain medical devices will see rates reduced from 12 percent or 18 percent to 5 percent or nil, whereas 3 life-saving drugs and medicines used for some cancer, rare disease, and chronic illness treatments, will be reduced from 5 percent to 0 percent.
Following this announcement, many companies including Metropolis Healthcare, Poly Medicure, Morepen Labs highlighted that reduced GST rates on medical devices, diagnostic kits, and surgical products will make treatments more affordable and enhance patient access. This relief package is expected to not only ease the financial burden on patients but also stimulate growth and drive innovation across the healthcare sector.
As a result, shares of Ajanta Pharma, Gland, Zydus Life, and others saw positive movement in today’s session. The GST reduction is expected to benefit patients by lowering the cost of treatments for major illnesses, including cancer and chronic conditions, making healthcare more affordable.
Written By Akshay Sanghavi
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