GST overhaul to boost consumer spending; FMCG, footwear QSRs, grocery sector to gain: Report

The sweeping GST rate reductions announced this week will bolster consumer spending and benefit sectors such as footwear, quick-service restaurants (QSRs), FMCG, and grocery retail, according to Global financial consultancy Bernstein. In a report, Bernstein flagged a notable shift: the reduction of GST on personal care and household products — including soaps, shampoo, hair oil, powder and toothpaste — from 12–18 per cent to 5 per cent. “This should provide pricing support in the immediate term to FMCG firms, allowing them to keep more part of the gross price that consumers are charged. In the medium term, it can drive demand via higher grammage in the products or via indirect higher wallet share with consumers,” the report said, as quoted by ANI. The consultancy expects retailers such as DMart, Vishal Mega Mart, and Star (part of Trent), as well as quick commerce platforms, to see significant upside.Impact on apparel and footwear Until now, apparel priced below Rs 1,000 attracted 5 per cent GST, while items above Rs 1,000 faced 12 per cent. Footwear was taxed at 12 per cent below Rs 1,000 and 18 per cent above. Under the revised structure, apparel and footwear priced between Rs 1,000–2,500 will draw 5 per cent GST, while the rate for apparel above Rs 2,500 has been raised to 18 per cent (footwear above Rs 2,500 remains at 18 per cent). “We think this is marginally positive for Trent as 30% of their revenues are above Rs 1,000 average selling price (ASP). ABLBL (Aditya Birla Lifestyle Brands Ltd) and ABFRL (Aditya Birla Fashion and Retail) would also benefit as a larger share of their products are above Rs 1000,” Bernstein noted. Value retailers such as Vishal Mega Mart, V-Mart, V2 Retail and Style Baazar are expected to see neutral effects as most of their inventory is priced below Rs 1,000. Footwear firms including Liberty, Campus and Metro will also be impacted by the GST changes.Relief for QSR chains Quick-service restaurants are seen as direct beneficiaries of GST cuts on inputs such as cheese, packaging materials, condiments, butter, ghee and margarine. “QSRs do not get input tax credit — hence all GST on their inputs are expenses. Any GST reduction impacts their gross margins immediately. In the medium term, they may choose to transfer some benefit to drive volumes as well. Within organised players, we expect Jubilant to benefit the most to the tune of 70-80bps improvement in gross margins,” the consultancy said. Other organised QSR players are expected to see improvements of 20–40 basis points.Part of GST revamp These changes are part of the next-generation GST restructuring cleared by the Council on September 3, following Prime Minister Narendra Modi’s Independence Day announcement of tax relief. Presented as a “Diwali gift,” the new GST rates will take effect from September 22 and are aimed at reducing citizens’ tax burden while supporting economic growth.