GST 2.0: Govt shifts focus from infrastructure spending to consumption growth

New Delhi [India], September 4 (ANI): The government's announcement of GST rationalization under GST 2.0 has set the stage for a major shift in the country's economic strategy.

According to a report by Axis Securities, the focus has now moved from capex-oriented spending to consumption-led growth, starting from the FY26 Budget onwards. It stated "The government has now shifted gears from Capex-oriented spending to consumption-led spending".

The report highlighted that the past decade was defined by development-focused schemes, with large-scale infrastructure projects such as roads, bridges, and metro systems serving as benchmarks of the ruling party's success. This capex push had been central to the government's policy agenda.

However, with the February 2025 Budget, the attention turned towards boosting the purchasing power of rural households and the middle class through tax relief measures, signaling a new consumption-driven economic regime.

The GST 2.0 reforms are seen as another big step in this direction. The 56th GST Council meeting, held on 3rd September 2025, approved a landmark move to rationalize the GST structure by reducing the number of slabs from four to three.

The 12 per cent and 28 per cent categories have now been scrapped, bringing most items under the 5 per cent and 18 per cent slabs. A 40 per cent slab has been created for sin goods, while certain essential categories have been placed under a Nil GST rate to directly spur consumption.

These changes will come into effect from 22nd September 2025, coinciding with the first day of the Navratri festival. The report noted that the rationalization is expected to particularly benefit MSMEs and SMEs, while also providing a boost to both rural and urban consumption.

With higher discretionary income in the hands of people, the consumer discretionary sector is likely to see strong demand. In addition, the reforms are expected to aid credit growth, which has remained sluggish since FY25.

The report added that some of the key sectors that could be key beneficiaries are, Consumer Durable, Building Materials, Automobiles, Retail, Cement, FMCG, and Real Estate.

Overall, the report highlighted that GST 2.0 will not only strengthen the government's initiative of driving consumption but will also have a cascading impact on the economy.

As per report, the increase in demand is expected to eventually provide a much-needed push to private capex, which has been weak for several years. (ANI)