1、EQUITY:AUTOS&AUTO PARTSIndia Auto and ConsumerGlobal Markets Research17 August 2025PM announces GST reforms consumption boostAutos,tractors,ACs,and food companies may benefit the most;approval likely before Diwali In his Independence Day address,the Prime Minister announced that the government will

2、roll out a major round of GST reform by Diwali(21 October 2025),aimed at simplifying the rate structure and reducing the tax burden on key categories.As per media reports,the proposal is to streamline GST into two principal slabs of 5%and 18%,with a higher 40%rate for luxury and sin goods and 99%of

3、items in the 12%bracket are expected to move to 5%,while around 90%of goods in the 28%slab may shift to 18%.This can positively impact sectors such as tractors,which are currently taxed at 12%and could move to the 5%bracket,while air-conditioners(ACs)may benefit from a shift to 18%.Foods companies m

4、ay also benefit as their tax may drop from 12%to 5%.For automobiles(currently at 28%GST rate),there are some latest news reports also indicating that“cars may be placed in a slab to end disputes arising due to classification by engine size and length.”In case tax is lowered for the auto sector by 10

5、%,it could boost demand,in our view,by 15-20%.A common rate of tax for small cars and SUVs may also hand a significant advantage to SUVs.However,EVs(currently at 5%GST rate)may see a meaningful impact on demand as the price gap with ICE will likely increase sharply.Whats Next:The centres proposal wi

6、ll be discussed by the Group of Ministers(GoM)on 21 August.Thereafter,the GST council will likely meet next month and approve the final rate structure.In our previous note(link),we had highlighted that the GST Council was considering removal of the 12%slab and rationalisation of the 28%rate and note