Reactions to India's reduction of consumption tax on hundreds items

India announced on Wednesday that it would reduce taxes on hundreds of items, from soaps to small vehicles, to boost domestic demand. It also simplified its complex goods and services tax structure, reducing the number of rate slabs to two from four. There were some exceptions, however, for luxury goods and "sin goods".

On Thursday, the benchmark BSE Sensex index and Nifty 50 both rose by as much as 1.1%. By 11:55 IST they had pared their gains and were each up around 0.5%.

Here's how the industry has responded so far:

ANISH SHAH, GROUP COOPERATIVE & MD MAHINDRA GROUP

"The next-generation GST Reforms... mark an important moment in India's quest to build a simpler and fairer tax system that is more inclusive."

Mahindra views these reforms in a transformative way. They simplify compliance, increase affordability, and energise the consumption while allowing industry to invest more confidently.

SAURABH AGAWAL, PARTNER, AUTOMOTIVE TASKS LEADER AT EY INDIA

The rationalization of GST on automobile vehicles and parts has been a welcome and significant change. This move, which makes vehicles more affordable in all segments will boost consumer spending and simplify the complex classification disputes that have plagued the industry for years.

SAMIR SHAH, EXECUTIVE DIRECTOR & CFO HDFC ERGO GENERAL INSURANCE COMPANY

"The GST Council's decision to exempt health insurance for individuals from GST is an important development. This decision is in line with the broader aim of the regulator to provide 'Insurance for All By 2047', and represents a significant step forward.

The extent of the reduction in premiums is yet to be determined, as it will depend on the availability of input tax credits, which we will learn more about over the next few days.

NILESH SHAH, MANAGING DIRECTOR, KOTAK MAHINDRA ASSET MANAGEMENT CO

The GST announcement reduces inflation, boosts growth, boosts the consumer's sentiment, does not disturb fiscal consolidation, and improves the ease of doing business. It also partially offers negative effects of tariffs.

SHAILESH CHANDRA PRESIDENT SOCIETY FOR INDIAN AUTOMOBILE MANUFACTURERS

This timely move will bring new energy to the Indian automobile sector and give consumers a reason to smile. These announcements, which will make vehicles more affordable for first-time buyers, middle-income families and those in the entry level segment, will benefit them greatly.

C S VIGNESHWAR PRESIDENT, FEDERATION OF AUTOMOBILE DELIVERERS ASSOCIATIONS

"The 56th GST Council Meeting marks a watershed for India's automotive retail industry. This is a bold step that will increase affordability, stimulate demand and strengthen India's mobility eco-system.

The levy of cess and the treatment of cess balances in dealer's books is an area that needs clarification to avoid ambiguity.

SANJEEV ASTHANA, CEO, PATANJALI FOODS LIMITED

"At Patanjali Foods we are committed to passing these benefits on to our customers. This initiative not only will increase FMCG penetration in urban and rural India, but it will also act as catalyst for wider economic revival by boosting consumption and supporting related sectors.

This reduction will benefit our categories like ghee soaps, biscuits and noodles, honey and chyawanprash.

RADHIKA RAO SENIOR ECONOMIST DBS BANK

Lower GST rates are expected to boost growth in the second and third quarters of this year, as well as the FY27 period. They will also improve operational efficiency and expand the size of formal economy.

SHRIPAL SHAH is the MD & CEO of KOTAK SECURITIES

The GST rate reductions are timely, as they come just before the holiday season and in the context of U.S. Tariff tiffs. Consumers will have more money to spend on FMCG, essentials, autos, and cement.

This should boost the demand and help traders and business see more volume. It may even have a positive impact on next quarter's profits. This could also help to reduce inflation. It will depend on how quickly the companies can pass these benefits onto their customers.

DEVARSH VAKIL HEAD OF PREMIUM RESEARCH HDFC SECURITIES

The GST reforms are a paradigm shift towards economic rationality. Rate reductions for essentials such as dairy, medicine, and food directly benefits consumers because of their inelastic nature.

These reforms are a powerful combination of multiple stimuli to stimulate consumption and economic growth.

SUDARSHAN VENU, CHAIRMAN TVS MOTOR COMPANY

The GST tax reductions are a major step by the government in order to boost growth. It's a great move for our industry, as it will make two-wheelers more affordable and help those who are looking to upgrade.

NEERAJ AKHOURY - PRESIDENT OF THE CEMENT MANUFACTURERS ASSOCIATION & MANAGING DIRECTOR AT SHREE CEMENT

The GST will be reduced to 18%, which corrects an anomaly that has existed for a long time, brings cement in line with other building materials and increases global competitiveness. Fairer taxation will boost consumption, and help support infrastructure and housing projects.

NITIN RAO is the CEO of INCRED WEALTH

"History shows that such measures contribute significantly to GDP growth, and we expect a repeat.

"It will be positive, but there is a slight concern that recent measures such as the tax reductions and budgetary measures haven't created the necessary consumption boosters. We'll have to wait to see if the third step will reverse the consumption trend, or if there is a bigger problem with consumer money availability.

RAHUL SINGH, CIO-EQUITIES, TATA ASSET MANAGEMENT

"The rationalisation of the GST rate, after the income tax reductions and lower interest rates is a serious attempt to boost consumption, and therefore the overall economic growth forecast.

This, along with some process reforms, is also good for SMEs. Retail banks and NBFCs will benefit from the growth in the next order.

RAJNEESH KUMAR, CHIEF CORPORATE AFFAIRS OFFICER, FLIPKART GROUP

These reforms will strengthen India's economic engine by lowering input costs, simplifying compliance requirements for MSMEs, and allowing small sellers, artisans/weavers, and smallholder farmers across all states to join ecommerce.

"Timely implementation will give a huge boost in consumption across all categories, increase market access and accelerate our collective progress towards a Viksit Bharat."

SHEETAL ARORA is the CEO of MANKIND PHARMA

The GST revisions represent more than just tax rationalization. They are a fundamental shift in the way India provides healthcare. The government has shown that affordability and innovation are compatible by removing GST from life-saving oncology and rare disease therapies, and reducing GST on essential medicines and diagnoses.

Amit Paithankar, CEO of WAAREE Energy

The recent GST rationalization shows the commitment of the Indian government to India's clean-energy transition. The reduction in project costs will reduce the cost of projects and increase capacity to meet India's clean-energy targets. This also sends out a strong message to investors and improves the financial viability of the renewable energy industry." (Reporting by Chandini Monnappa, Bharath Rajeswaran, Manvi Pant, Kashish Tandon, Meenakshi Maidas, Nandan Mandayam, Yagnoseni Das, Vivek Kumar M and Hritam Mukherjee in Bengaluru; Editing by Mrigank Dhaniwala and Nivedita Bhattacharjee)

(source: Reuters)