Is the Revenue of India Inc. Set to Rise by 7% Due to GST Cuts?

New Delhi, Sep 5 (NationPress) The revenue of India Inc. is projected to increase by 6-7% this financial year, driven by the recent cuts in goods and services tax (GST) rates. These reductions are expected to positively influence consumption, which represents 15% of corporate revenue, as highlighted in a Crisil Intelligence Report released on Friday.

The timing of these cuts is particularly beneficial, coinciding with ongoing global uncertainties and aligning with India’s festival and wedding season when consumption typically reaches its peak, the report indicates.

The revised GST rates will help decrease product prices in vital sectors such as fast-moving consumer goods (FMCG), consumer durables, and automobiles. While the impact on FMCG and durable goods will be immediate, the effect on sectors like construction will require monitoring. The anti-profiteering clause within the GST framework may limit significant changes to profit margins, according to the report.

In the automobile sector, the GST reduction on two-wheelers with engine capacities below 350 cc—making up about 90% of the market—is expected to boost sales by 100-200 bps due to enhanced affordability of motorcycles and scooters.

This change will significantly benefit the entry-level motorcycle market, which has been facing challenges due to a sharp price increase of 45-50% since fiscal 2019. This segment represented 45% of all two-wheeler sales in fiscal 2025, down from 68% in fiscal 2019, as per the report.

For small cars and compact utility vehicles, which account for about 55% of the passenger vehicle market, the rate cut is anticipated to lead to a 8-9% reduction in prices, resulting in an increase in volume by 200 bps to 4-6%, surpassing previous estimates of 2-4%.

The GST reductions in the agricultural inputs sector are expected to streamline operations and enhance consumer demand in specific areas.

In the fertiliser sector, lowering the GST on essential raw materials like sulphuric acid, nitric acid, and ammonia from 18% to 5% will aid in better working capital management, as reduced input tax credit claims allow manufacturers to optimize operations.

However, sales volumes may remain stable due to the input tax credit system. The adjustment of the inverted tax structure implies that the GST rate reductions on raw materials won't significantly alter retail prices of final products, the report clarifies.

Overall, the GST reductions are set to positively affect the agricultural inputs sector, fostering growth, better working capital management, and increased competitiveness. The decline in GST on key raw materials, reduction in farmer retail prices, and overall improvements are all projected to bolster industry growth.

The anticipated lower GST on key construction materials is expected to reduce prices, stimulating the construction sector. This price drop will consequently lower construction costs for both urban and rural individual housing buildings (IHBs), allowing homeowners to allocate savings towards larger or enhanced living spaces, as noted in the report.