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Festive Gift (With Fine Print)
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Good Morning. On paper, the Goods and Services Tax (GST) reforms seem like a win for the common Indian. And for most of it, it is. But dig deeper, you’d find a slight trade-off — coal, pipelines and oilfield services now attract higher GST, costs that will flow quietly into power bills and fuel prices. GST on goods visible to the eye have been reduced, but there are some hidden costs as well.
In other news, auto stocks rallied in the hope of a consumption boost, while it wasn’t all cheers from the aviation industry. Meanwhile, is Germany a new destination for Indian students?
GST Reform Will Boost Consumption, But There Are Some Hidden Costs
India’s GST reforms announced by Finance Minister Nirmala Sitharaman on Wednesday night have added to the exuberance of markets. Rates have been reduced on a number of goods and services of mass consumption.
The GST Council has raised the cost of energy in the economy, increasing the GST on coal from 5% to 18%, and increasing the GST on transportation of crude and refined products by pipeline from 12% to 18%.
The GST on job contracts associated with the exploration and development of oil fields and the production of hydrocarbons, has also gone up. Since GST does not apply to either electricity or petrofuels, the increase in these tax rates will add to the cost of energy in their totality.
Visible Vs Invisible
Prices at the fuel pump are an opaque mishmash of duties, cesses, and staggered changes that oil marketing companies make to pass on changes in global crude prices. So when the price goes up, it is not clear to the consumer why that happens.
The cost of thermal power, which is the mainstay of India’s power generation, will go up thanks to the increase in GST on coal — the defence that the new 18% GST would subsume the Rs 400 a tonne compensation cess does not wash, as the compensation cess will disappear sooner rather than later, when borrowings made to pay compensation to the states are paid off, but the GST at the enhanced rate would continue.
This would raise both the cost of power and the electricity duty that the states levy on power prices. Consumers would, of course, feel the increase in power prices, but attribute it to the rise in electricity duty and state-level decisions, rather than link it to GST changes.
In other words, the latest round of GST reforms seeks to propitiate consumers by lowering rates they can see, while raising rates they do not directly observe. Visible taxes down, invisible taxes up.
Meanwhile, the meeting of Russia’s leader, Vladimir Putin, with the leaders of the world’s two largest countries — one of which is the world’s second largest economy, and the other, the world’s fastest growing large economy — tells the West that it no longer sets the agenda for the rest of the world.
THE CORE POLL
Do you feel the GST cuts on mass consumption goods outweigh the higher energy costs? |
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FUTURE PROOF
AI Starting To Hit Mission-Critical Processes, Says Accenture’s Kaushik Sanyal
When one hears of agentic artificial intelligence (AI), we often think of customer-facing applications such as chatbots and virtual assistants. But agentic AI is doing much more than that. It is quietly reshaping the mundane backend of enterprises by taking over tasks that would take days for humans.
Kaushik Sanyal, managing director for data & AI business for strategy & consulting global network at Accenture, said to The Core Report that he was seeing Agentic AI being used a lot for proposals.
“What would probably take a few consultants days to assess and then respond to proposals, people are just going into these applications, going through, understanding what they're saying, coming back, figuring out what the ask is, figuring out what the differentiators are, and then potentially putting their company's responses very effectively. In hours, that would have probably taken days, if not weeks, to respond. So that's one interesting thing,” he said.
This kind of AI is also being used in other parts of organisations, such as finance, supply chain, procurement operations, among others.
“Now it is starting to hit real processes within organisations, be it software development, technology development, be it the network thing that I just mentioned, day-to-day core mission-critical options that are starting to get impacted by agent AI,” said Sanyal.
He also emphasized the critical role of talent in all of this, highlighting Accenture’s role in building talent in initiatives such as the Accenture B-School Challenge 2025
Listen to the entire conversation here.
Brought to you in partnership with Accenture In India.
FROM THE PERIPHERY
GST Cut On Cars; Auto Stocks Rise
One of the fairly visible cuts for GST is cars. The government has cut the GST on small cars, motorcycles, buses, trucks and ambulances from 28% to 18%. Though it increased the GST on luxury cars to 40%, it removed a cess on cars, effectively reducing the total tax. This is likely to give a boost to passenger vehicle retail sales that have been tepid.
Fast Facts: Despite speculations that India will increase the GST on luxury EVs to 40%, the government maintained a 5% GST on all electric vehicles.
Implications: Indian auto stocks rose by up to 3.7% after the announcement—the highest in 11 months. Mahindra, which has the largest share in India’s EV market, saw its stock rise the most, by 6%. That’s good news, as auto sales, particularly car and two-wheeler sales, have been down throughout 2025.
Analysts Back GST Reset!
Industry voices and experts have mostly welcomed the GST reform announced on Wednesday. Pranjul Bhandari, chief India and Indonesia economist of HSBC, flagged the bigger picture: “The rationalisation was not limited to lower and lesser tax rates. Some of the inverted duty problem was corrected… If these improvements are indeed made, it will improve the ease-of-doing-business environment.” She added that rate cuts could shave 0.5–1 ppt off headline CPI, paving the way for another 25 bps RBI repo cut to 5.25% later this year. Setting the growth context, Aditi Nayar, chief economist of ICRA, said, “The GST rationalisation is a welcome and well-timed move… Private sector capex decisions may get a boost.” However, it wasn’t all cheers from the aviation industry.
Not All Cheers. The International Air Transport Association (IATA) expresses unhappiness that the reforms would make premium air travel more expensive. “This increase runs counter to the efforts of Indian carriers, which have been investing in their premium products to enhance the travel experience on their flights,” said Sheldon Hee, regional vice president.
What Next?: According to Reuters, Nilesh Shah, managing director, Kotak Mahindra Asset Management Co, said the GST announcement would lower inflation and increase growth. He said it “boosts consumer sentiment, doesn’t disturb the path of fiscal consolidation, improves ease of doing business, and partially offers adverse effects of tariffs”.
Will Logistics Improve?
India is planning a fivefold expansion of its high-speed road network over the next decade, with an investment of Rs 11 lakh crore ($125 billion), Bloomberg reported sources as saying. The plan adds 17,000 km of access-controlled expressways, allowing speeds of up to 120 kmph to cut logistics costs and boost connectivity.
Overview: Approximately 40% of the network is already under construction, with completion targeted for 2030, and the remaining 60% is expected to be completed by 2033. To fund the push, projects with high returns will follow the build-operate-transfer (BOT) model, while others use the Hybrid Annuity Model.
Flashpoint: Despite tepid private interest in roads, investors such as Brookfield, Blackstone, Macquarie, CPPIB, and Adani are making significant investments in Indian infrastructure. Deloitte estimates the country could draw hundreds of billions in fresh investment.
Indian Students Enroute Germany?
At a joint press conference with his Indian counterpart, the German foreign minister, Johann Wadephul, said that Berlin wants to invite more skilled Indian labour and students. Already, there are 60,000 Indian students in the country, making them the largest group. Germany is also investing in language learning centres in India, as language is one of the main barriers to Indians opting for the country.
Catch Up Quick: Germany has an acute shortage of labour—companies reported 1.4 million unfilled positions in healthcare, IT, education, construction and public transport.
Setup: Germany’s pro-immigrant stance comes at a time when the US and UK, two favourite destinations of Indian students, are shutting their doors to foreigners. The UK warned students against overstaying their visas; previously, the US deported several pro-Palestinian international students. The US has also made its visa approval process much stricter starting this year.
PODCASTS
The Catch Behind India's Co-living Boom
Finding a home on rent is challenging. Many landlords have arbitrary rules. They say they’ll only rent to couples or families, or to people with certain jobs.
As more young people move to cities to study and work, they need housing. Enter: co-living spaces. These are shared living environments, where a professional company manages your daily chores, housekeeping and even cooking for you.
Reports say that the co-living market in India was worth 4,000 crore rupees in May 2025. And that it will grow by 5 times by 2030, and will be worth 20,600 crore rupees.
What’s the rage behind co-living? Why are people opting for these spaces versus living with flatmates or living in a PG? Find out more in the latest episode of The Signal Daily.
Stocks Jump On GST Rate Cuts
On Episode 669 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Rotti, Founder and CEO of Tax Compass, Madhavi Arora, Lead Economist at Emkay Global Financial Services, as well as Kaushik Sanyal, Managing Director for Data & AI, India at Accenture.
Stocks jump on GST rate cuts, clothing industry gets a shock.
The big question, will demand and consumption rise because of lower consumption tax?
The unfinished agenda on GST reform
More used cases for agentic AI, including in areas you may not guess
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