GST reforms: A game-changer for economy? Check leading analysts' views

Goldman Sachs, in a note to clients, said that consumer products which are at the 12% slab rate could benefit significantly. Morgan Stanley has said that triggers are in place for benchmarks to hit new highs. GST reforms seem imminent with likely positive effects on growth and likely lower interest rates into 2026, Morgan Stanley said.

"Indian equities already have a strong fundamental case for re-rating, and recent developments provide triggers for this to happen sooner rather than later," Morgan Stanley added.

Kotak Institutional Equities in a note said new rates may provide a ₹2.4 trillion boost to the economy, benefiting mostly autos and durables.

CLSA said that materials and consumer durables items such as cement and ACs currently attract a 28% GST rate, which could potentially be lowered to 18%. "We expect this change to strongly influence demand for air conditioners, particularly after recent signs of weakness," CLSA said.

Morgan Stanley added that autos currently fall under the 28% GST slab rate. If a move to 18% happens, there will be sharp price drops which could drive the next upcycle for the automobiles.

"The timing of GST reform is apt, and this potential policy stimulus, along with personal income tax relief, front-loading of rate cuts (100 bps CYTD), softer inflation (boosting purchasing power) and improved credit availability on regulatory easing, should help buoy household consumption over the next 2-3 quarters, in our view," UBS said in a report.

UBS estimates that the revenue loss of GST rationalisation would be to the tune of ₹1.1 trillion annually.

“For FY26, the revenue loss of ₹43,000 crore would get offset from the surplus cess collections and higher than budgeted RBI dividend transfer (₹2.7 trillion versus ₹2.1 trillion budgeted). We believe GST cuts can have a larger multiplier impact than income or corporate tax cuts, as they directly affect consumption at the point of purchase, potentially leading to higher consumer spending,” UBS said.

“A GST rate cut would also lower inflationary pressures and likely increase the probability of further monetary easing by the RBI. With underlying inflationary pressures remaining benign and considering RBI's neutral policy rate assumption of 1.4%-1.9%, we see space for the terminal repo rate to fall to the 5.0-5.25% range,” UBS added.