Let us start from the consumption front. Which categories, in your view, stand to gain the most if GST on items like ACs, refrigerators, or ghee is reduced, and how meaningful could this boost be for consumption demand?
Amnish Aggarwal: It depends on how the government merges the various GST slabs. Currently, we have slabs of 5%, 12%, 18%, and 28%, plus compensation on luxury goods. Many items currently at 12% are likely to move to 5%, including daily-use items and processed foods. Items at 18% may also see some reduction, though moving them directly to 5% may be difficult due to revenue considerations.
For durables like ACs and refrigerators, which are currently at 28%, the rate could reduce to 18%, but items already at 18% may not see much change. Overall, the government aims to reduce the burden on the common man, so daily-use items and smaller goods are expected to benefit consumers the most.
How much of this benefit do you expect companies to pass on to consumers versus retain for margins? Which sectors might use it more as a profitability cushion?
Amnish Aggarwal: Historically, companies are required to pass on tax benefits to consumers within a defined time frame. There is very little chance that they will retain these benefits without passing them on. Over time, companies may gain from higher volumes or adjust prices if inflation rises, but the initial duty cuts or GST reductions will largely benefit consumers.
The aim of this exercise is to boost demand. How much could this trigger pent-up demand for aspirational goods like durables and apparel?
Amnish Aggarwal: The impact depends on the extent of the tax reduction. For example, a reduction from 12% to 5% may translate to a real price change of around 3–3.5%. However, the bigger effect is on consumer sentiment. For durables and slightly expensive items, tax reductions could have a more meaningful impact.
The goal is to support domestic consumption and manufacturing, bringing more people into the organized market, boosting overall consumption, and benefiting larger brands and corporations. While price changes may not be drastic, improved sentiment and a rationalized tax structure could drive significant demand.