GST cut to boost FMCG demand; Britannia, Nestle among top Nomura picks

The GST Council has the rates on several staple and essential categories from 18 per cent to 5 per cent

The 56th Goods and Services Tax (GST) Council meeting, led by Finance Minister Nirmala Sitharaman, on September 3, 2025, approved the two-tier structure - leaving only 5 per cent and 18 per cent slabs, and a special tax of 40 per cent. The 12 per cent and 28 per cent slabs have been abolished, with most categories of 12 per cent going to 5 per cent, and most categories of 28 per cent going to 18 per cent. The new structure will come into effect from September 22, 2025.

 

The GST Council has lowered the rates on several staple and essential categories from 18 per cent to 5 per cent. According to foreign brokerage Nomura, this meaningful cut is expected to provide relief to stressed consumption, support volume growth, and drive formalisation, particularly in segments where unorganised, local, and regional players currently hold a substantial market share.

 

Nomura India has projected that companies in the FMCG sector, such as Britannia, Nestle India, Dabur India, Hindustan Unilever, and Colgate Palmolive, will be the key beneficiaries of this rate cut. 

 

According to Nomura, Colgate could see substantial benefits as 100 per cent of its portfolio - primarily toothpaste, toothbrushes, and personal wash - moves from an 18 per cent GST rate to 5 per cent, while toothpowder drops from 12 per cent to 5 per cent. However, the brokerage maintains a 'Sell' rating on the stock. 

 

Britannia Industries' 80 per cent of Indian portfolio, primarily biscuits, will fall under the reduced GST rate. Similarly, Nestle India will also benefit from the GST rate reduction on categories like coffee, chocolates, noodles and milkmaid, which constitute about 67 per cent of its revenue. Nomura has a 'Buy' rating on both the stocks.

 

Additionally, companies such as Dabur, Hindustan Unilever, Bikaji, Emami, Bajaj Consumer and Mrs Bector, which have sizable parts of their portfolios falling under the revised GST slabs, are also likely to benefit. 

 

Footwear companies are also likely to gain, with GST rate down to 5 per cent from 12 per cent, earlier, on footwear up to ₹2,500. Apparel companies will benefit from an increased value in a 5 per cent slab to up to ₹2,500 from ₹1,000 previously. 

 

Analysts at Nomura believe that GST rate reduction on a majority of daily consumer goods will drive formalisation by reducing the arbitrage between taxpaying companies and non-taxpaying companies to a bare minimum.  

 

"Quite a few categories in India have a notable share from unorganised/local/regional players. This should entice consumers to shift to better products, and is a long-term positive for organised companies, in our view," the brokerage said in a note.