‘GST 2.0 may escalate costs for firms, but do good for earnings’ Business News & Hub

The revision of Goods and Services Tax (GST) slabs will have a short-term increase in cost for corporate India in the second and third quarters of fiscal 2026, as companies will have to reclassify inventory and bear the transition impact while complying with the new rates.

“Companies must get regulatory clarity and re-evaluate goods/services classification keeping in mind the new slabs, and many sectors need to review inventory for correct reclassification including updated billing/invoicing systems,” said Manmeet Kaur, Partner at Karanjawala & Co.

This means companies would incur costs to shift to the new regime. The compliance costs also include the cost of litigation as hearings in the Appellate Tribunal would begin in December and go on till June, said Shankey Agrawal, Partner – BMR Legal.

The costs are expected to show up in Q2 and Q3 of fiscal 2026, Mr. Agrawal said.

Anti-profiteering rules have been discontinued, therefore businesses would be well-advised to still pass on genuine tax savings to customers in line with the spirit of the law he added. Anti-profiteering rules ensure the effect of a cost reduction from GST is passed on to the end consumer. 

The GST regime change comes in the backdrop of continuously disappointing quarterly earnings in corporate India. While the changes in the GST structure are expected to induce consumption, simplify taxation and ease compliance burden in the long term, the costs will show up in the short term, experts said.

While the compliance costs are expected to increase, economists are also positive about the impact of GST on revenue and earnings. “The primary reason for the underperformance of the market in the past year is weak domestic growth. Earnings have grown by single digits for five straight quarters amid weak domestic demand. With these policies in place, we expect growth to accelerate Q4 CY25 onwards. Consensus expects earnings per share (EPS) to grow 14% YoY in 2026, and in our view the policies supporting growth along with a favourable base have eased the risks of earnings downgrades and set the stage for foreign investors to return,” HSBC Global Investment Research said in a note.