Auto, FMCG, consumer durables: Consumption stocks in focus as GST 2.0 comes into effect; will 'bachat utsav' see stellar rally?

From kitchen staples to electronics, from medicines and equipment to automobiles, goods and services will be cheaper from Monday as the reduced GST rates on about 375 items come into effect.

In a bonanza to consumers, the GST Council, comprising the Centre and states, on September 3, 2025, announced the reduction in the tax rates on goods and services, from September 22 -- the first day of the Navaratri.

The GST will now be a two-tier structure wherein the majority of goods and services will attract a tax of 5% and 18%. A 40% tax will be levied on ultra-luxury items, while tobacco and related products will continue to be in the 28% plus cess category.

Till now, Goods and Services Tax (GST) was levied in 4 slabs of 5, 12, 18 and 28%. Besides, a compensation cess is levied on luxury items and demerit or sin goods.

Mass consumption items such as ghee, paneer, butter, 'namkeen', ketchup, jam, dry fruits, coffee and ice cream, and aspirational goods like TVs, ACs and washing machines will become cheaper.

Fast-moving consumer goods (FMCG) products such as hair oil, soap, face powders, shampoos, toothbrushes, and toothpaste, along with all food items, have come under the lower slab of 5% from 18%. It has also reduced duty on room AC and TVs above 32 inches to 18%.

As regards automobiles, petrol, LPG and CNG vehicles of less than 1,200 cc and not more than 4,000 mm in length and diesel vehicles of up to 1,500 cc and 4,000 mm in length would move to the 18% rate from the current 28%.

Motorcycles up to 350 cc would be taxed at a lower GST of 18% against 28% currently.

All automobiles above 1,200 cc and longer than 4,000 mm, as well as motorcycles above 350 cc and racing cars, will be charged with a 40% levy.

Small hybrid cars will also benefit, while EVs will continue to be charged at 5%.

GST on tractors with engines less than 1800 cc has been reduced from 12% to 5%. Road tractors for semi-trailers (engine capacity more than 1800 cc) have been lowered from 28% to 18%.

Further, the tax on tractor parts has been reduced to 5%.

The majority of the components used for the manufacture of motorcarsand motorbikes, i.e., the auto components, have also been reduced to 18%.

PM Modi's address to the nation

On Sunday, September 21, in his address to the nation, Prime Minister Narendra Modi asserted that the GST reforms kicking in from Monday will accelerate India’s growth story, emphasising that it is a big and important step for “Aatmanirbhar Bharat” and linking a boost to 'swadeshi' products to the country’s prosperity.

Addressing the nation on the eve of the auspicious Navratri, which will mark the implementation of the revised GST rates, Modi said the reduced prices of items across the board will launch "bachat utsav" for people.

Urging people to buy indigenous products, PM Modi said swadeshi will render strength to the country's prosperity in a similar way it powered India's freedom movement.

"We have to make every home a symbol of swadeshi. We have to decorate every shop with swadeshi (goods)," the PM said.

The roll-out of next-generation GST reforms months after his government raised the income tax exemption on annual earnings of up to ₹12 lakh will be a “double bonanza” for citizens, helping them realise their dreams by slashing expenditure and increasing savings, he said. Citizens will save Rs 2.5 lakh crore from the twin decisions, he said.

The PM urged states to boost manufacturing and create a conducive atmosphere for investment, saying that when the Centre and states work together, the dream of a self-reliant India will be realised.

How consumption-related stocks have performed

Consumption stocks, especially automobiles, have seen a sharp surge following the GSST rate rationalisation. For instance, Maruti shares have rallied over 10.6% in the past 30 days, while M&M stock price has gained nearly 6%. Eicher Motors shares have jumped around 18%, and Hero Motocorp shares have gained around 8.4% (as of Friday, September 19 closing on the NSE).

Among FMCG names, Britannia Industries has rallied nearly 10%, while Tata Consumer Products has gained over 4%.

The NIFTY AUTO index has rallied around 7.5% in the past 30 days and 24% in the past six months. The NIFTY FMCG index, on the other hand, has rallied nearly 6% in six months.