NextGen GST Reform: Impact on Raw Materials Supply Chains in India

The Government of India has announced sweeping GST rate cuts under the Next-Gen GST Reform, aimed at reducing costs and boosting economic activity. While consumers will notice cheaper essentials and appliances, the real impact lies in industrial supply chains — particularly for steel, polymers, and downstream manufacturing industries like automotive and appliances.

For raw material suppliers, this reform is more than just a tax change — it’s a signal to recalibrate their procurement strategies and prepare for a surge in demand across multiple industries.

1. Impact on the Polymer Supply Chain

Polymers are at the heart of packaging, automotive, and consumer durables.

• GST on plastic beads and related goods has been reduced from 12% to 5%.
• This makes polymer inputs more affordable for processors and converters.
• Industries like automotive components, packaging, and home appliances — all big consumers of polymers — will benefit from reduced costs.
• Lower costs for manufacturers mean greater demand for raw materials such as polypropylene (PP), polyethylene (PE), and PVC.

Takeaway: Polymer suppliers and traders can expect higher volumes and improved competitiveness in pricing.

2. Steel Industry to Gain from Downstream Demand

Steel stands out as one of the biggest beneficiaries of the reform, thanks to its deep links with automobiles, appliances, and agricultural equipment.

• Automobiles: GST on petrol, diesel, hybrid, and CNG cars cut from 28% to 18%. This will boost vehicle demand, driving higher consumption of flat and long steel products.
• Agri-machinery: Tractors and irrigation systems now attract just 5% GST, making rural machinery more affordable and increasing demand for steel-intensive equipment.
• Consumer appliances: Items like TVs, ACs, and washing machines are now taxed at 18% (down from 28%), which indirectly drives demand for steel sheets, hot rolled coils, and speciality grades used in appliances.

Takeaway: Steel demand is set to rise across automotive, rural, and appliance industries, creating fresh opportunities for mills, distributors, and processors.

3. Boost for Automotive & Appliances Supply Chains

The GST reform has made vehicles and electronic appliances significantly more affordable:

• Automobiles: Rate cuts will not only stimulate vehicle sales but also enhance demand for supporting supply chains — from polymers (interiors, plastics) to steel (frames, panels).
• Appliances: Lower GST on televisions, ACs, and washing machines will reduce retail prices, encouraging higher consumer demand. This uptick means more raw material requirements — from steel coils to polymer resins.

Takeaway: The reform directly strengthens demand for raw material inputs, making supply chains more active and volume-driven.

4. Agriculture Equipment and Rural Demand

The agricultural sector saw significant GST relief:

• Tractor parts, irrigation systems, and bio-nutrients dropped from 12% to 5%.
• Affordable farm equipment encourages rural mechanisation, indirectly boosting demand for steel, castings, and polymers used in machinery manufacturing.

Takeaway: Rural industrial demand is set to increase, with upstream benefits for steel and polymer suppliers.

Key Highlights

• GST cut on polymers (12% → 5%) makes raw materials more affordable.
• Steel demand to rise due to lower GST on automobiles, appliances, and agri-machinery.
• Automotive and appliance supply chains get a direct boost.
• Rural demand for farm equipment is expected to increase, benefiting steel and polymer usage.

Conclusion

The Next-Gen GST Reform is a turning point for India’s industrial raw material markets. By reducing rates on automobiles, appliances, polymers, and farm equipment, the government has lowered costs and unlocked new demand opportunities.

For suppliers of steel and polymers, this is the time to optimize supply chains, strengthen procurement networks, and prepare for rising demand across downstream industries in 2025.