Corporate Grapevine     

Published: August 31, 2025
Updated: August 31, 2025

Simpler GST will boost capex

The Indian government has submitted a proposal on Goods and Services Tax (GST) rate rationalisation and reforms to the Group of Ministers (GoM). Once tabled before the GST Council, the plan is expected to secure the necessary votes for approval. However, clarity is awaited on whether the 28% GST rate on automobiles will be altered.

In 2006, New Delhi cut central excise duty on cars under four metres in length from 24% to 16%, spurring a surge in sales and highlighting a price elasticity of about 2.0x. A study of nearly 100 motorcycle and scooter models shows a price elasticity of roughly 1.6x for the two-wheeler industry, with even higher sensitivity in the entry-level segment.

For commercial vehicles, the impact is expected to be muted as buyers generally avail input tax credits, making GST a pass-through cost. This is particularly true for medium and heavy commercial vehicles (MHCVs). Based on these elasticity assumptions, analysts estimate additional volume growth tailwinds for leading auto companies if rate reductions materialise, and a massive boom in fresh Capex.

Cement Manna

India’s cement industry is set to benefit from upcoming government incentives such as Goods and Services Tax (GST) rationalisation and higher infrastructure spending, with demand expected to accelerate in the construction sector.

UltraTech Cement Ltd, the country’s largest cement maker, said India’s focus on infrastructure under programmes like Gati Shakti, affordable housing, and manufacturing-linked incentives will drive consumption growth. “The construction sector is poised for robust performance,” Chairman Kumar Mangalam Birla said, citing supportive fiscal policies and strong macroeconomic fundamentals.

Analysts expect GST simplification, if implemented as proposed by the government, to reduce costs across the supply chain, bolstering demand in housing and commercial projects. With UltraTech adding capacity at a record pace, the sector is positioning itself to ride the next wave of growth.