India Inc sees capex, demand surge after Modi's Next-Gen GST overhaul plan

PM Modi's promise of a sweeping GST overhaul aims to lower tax rates, simplify compliance, and modernise the system, spurring growth in sectors like manufacturing, housing, and consumer goods

India’s corporate leaders are betting on revival in capital spending and consumer demand after Prime Minister Narendra Modi on Friday vowed to deliver sweeping goods and services tax (GST) reforms by Diwali.

 

The overhaul, described by Modi as a “Diwali gift” during his Independence Day address, aims to lower tax rates, simplify compliance, and modernise the GST system to make it more growth-friendly.

 

Corporate leaders expect the planned revamp to cut levies on daily-use goods, rationalise rates to address inverted duty structures, and move towards a two-slab framework — one standard rate and a lower merit rate for essentials, with special rates for food products.

 

 

 

The reforms will focus on easing the tax burden on small industries and micro, small and medium enterprises (MSMEs). It will make compliance less cumbersome through technology-driven measures such as pre-filled returns, faster refund processing, and fully digital registration. 

Industry executives say the potential impact on investment decisions could be significant, particularly in manufacturing, logistics, housing, and consumer goods. 

“We applaud the announcement of a comprehensive GST review after eight years, which will reduce tax burden on consumers and businesses and enhance ease of doing business. The commitment to reduce compliances, eliminate redundant regulations and create a dedicated reform task force will strengthen India's position as a global manufacturing hub. We endorse PM's vision of producing world-class quality products at competitive costs, and the industry assures its commitment in realising this goal,” said Harsha Vardhan Agarwal, President of Federation of Indian Chambers of Commerce & Industry (FICCI). 

Satyakam Arya, managing director (MD) and chief executive officer (CEO) of Daimler India Commercial Vehicles, said the simplified GST would reduce operating costs across the vehicle value chain and stimulate demand for trucks and buses.

 

“The proposed reforms will further strengthen our ability to invest in advanced, efficient technologies, create more local jobs, and enhance India’s role as a competitive global manufacturing hub,” Arya said. He added that a stable tax framework would support its long-term capacity expansion.

 

In real estate, Pradeep Aggarwal, founder and chairman of Delhi-based Signature Global (India) Ltd, said the reforms could help rationalise input prices, improve cash flows, and make housing more affordable for buyers.

 

“Long-term clarity on tax rates will enable the real estate sector to plan projects with greater confidence and better cater to the evolving needs of homebuyers,” Aggarwal said.

Corporate advisors say moving to a two-rate GST structure would align India with advanced economies, reduce classification disputes, and encourage compliance.

 

“Reduction in GST rates will contribute to price reductions, which will lead to increased consumption,” said MS Mani, partner at Deloitte India.

 

He added, “However, the absence of anti-profiteering provisions now would make it incumbent for businesses to self-regulate and pass on the reductions to consumers.”

 

The GST overhaul comes as the government seeks to accelerate growth to achieve its goal of making India a developed nation by 2047.

 

Economists say a simpler, investment-friendly tax regime could bolster both domestic and foreign investment. It would provide a tailwind to manufacturing and exports at a time when global trade remains under pressure. 

“This is more than just a policy shift, it’s a signal of confidence in India’s consumption story,” said Mohit Malhotra, CEO at Dabur India. 

(Ishita Ayan Dutt, Shine Jacob, Sanket Koul, & Akshara Srivastava)