Sin Stocks Under Spotlight as GST 2.0 Reshapes the Tax Landscape

GST 2.0 is the latest major reform of India's Goods and Services Tax (GST) system, set to take effect from 22 September 2025.

It simplifies the structure of GST slabs by reducing the multiple existing slabs (5%, 12%, 18%, 28%) to primarily two main slabs: 5% for essential items and 18% for standard goods and services.

Additionally, a new 40% "demerit rate" is introduced for sin, luxury, and demerit goods. Here are a few stocks that are impacted by the same.

#1 Delta Corp

First on our list is Delta Corp.

Delta Corp is India's largest gaming and hospitality company, primarily operating casino gaming and hospitality services under the brand Deltin Casinos & Hotels.

The company runs offshore and onshore casinos across Goa, Sikkim, and Daman, including popular properties such as Deltin Royale, Deltin JAQK, and Deltin Suites in Goa, and The Deltin, a five-star integrated resort in Daman.

The GST Council approved a demerit GST rate of 40% that applies to online gambling and online money gaming under GST 2.0.

This new tax slab was introduced by the GST Council as part of India's GST reforms to classify online gambling and related activities as banned or harmful goods/services.

Earlier, the specified rate was just 28%. The new rate is likely to have a direct impact on Delta Corp for its casino and gaming business.

Delta Corp Financial Snapshot (FY21-25)

Source: Equitymaster

Over the last few years, the revenues have been falling, though the company has been seeing an improvement in net profits.

For the quarter ending 30 June 2025 net sales of the company reached Rs 1,842 m, which was higher than Rs 1,780 m in the corresponding period of last year. Net profits for Q1 FY26 dropped to Rs 291 m from Rs 346 m YoY.

While Delta Corp will be impacted by the revised GST demerit rate, the company is taking steps to expand. It's investing Rs 4.50 billion (bn) in a state-of-the-art vessel to replace Kings Casino, doubling its capacity to 4,000 positions.

Apart from this by the end of this year, Delta Corp will offer a curated mix of world-class gaming, gourmet dining, wellness and entertainment, casual food courts, vibrant sports bars, a wellness retreat, kids' zones, premium retail, and immersive entertainment.

The company's real estate foray is also gathering momentum. The real estate development platform with Alpha Alternatives Fund Advisors LLP and Peninsula Land (with a Rs 7.65 bn corpus) is focused on high-potential Mumbai Metropolitan Region such as Alibaug, Khopoli, and Karjat.

The platform recently acquired 2 land parcels totaling 40 acres in Alibaug and Karjat, emerging hotspots near Mumbai - with expansion plans underway across other high potential destinations.

This should help the company moving forward, though the pinch of the new GST rates will be felt.

To know more check Delta Corp fact sheet and latest quarterly results.

#2 Varun Beverages

Second on our list is Varun Beverages.

Varun Beverages is an Indian multinational company that manufactures, bottles, and distributes beverages.

The company handles a wide range of PepsiCo products including Pepsi, 7 Up, Mountain Dew, Mirinda, Tropicana, Gatorade, Sting energy drinks, Creambell milkshakes, Lipton iced tea, and Aquafina water.

Varun Beverages operates extensively in India (covering 27 states and 7 union territories) as well as in multiple countries across Africa and parts of Asia.

The GST rate on carbonated beverages and caffeinated drinks produced by Varun Beverages has been increased drastically to 40% from the earlier 28% plus cess.

This raises the cost burden on these products, which form a major part of Varun Beverage's portfolio, causing concerns about higher prices and potential demand slowdown.

On the positive side, GST rates on drinking water and fruit juices, which constitute about 30% of the company's volumes, have been cut significantly from 18% and 12% to 5%.

This reduction is expected to stimulate demand in these segments, and Varun Beverages could pass on the tax benefits to consumers and expand capacity to capitalise on this.

Varun Beverages Financial Snapshot (December 2021-24)

Source: Equitymaster

For the quarter ending 30 June 2025, the company reported revenues of Rs 71,630 m, against Rs 73,337 m reported for the period ending 30 June 2024.

Varun Beverages reported net profit of Rs 13,267 m for the quarter ending 30 June 2025, against Rs 12,624 m in the quarter ending 30 June 2024.

Moving forward, the company may not be severely impacted given that there has been a reduction in GST rates on drinking water and fruit juices, which cushions the hike on carbonated beverages.

This apart, the company has undertaken rapid expansions plans in the last few months. In the international markets, Varun Beverages Morocco has commenced commercial production of PepsiCo's snacks product 'Cheetos'.

Varun Beverages has also enhanced capacity by setting up a can line in Durban, one of its existing production facilities.

It's also awaiting approval from Competition Commission of South Africa for land parcel purchase adjoining to its production facility in Boksburg to further enhance capacity & backward integration.

Varun Beverages has acquired 50% equity share capital of Everest Industrial Lanka, a company in Sri Lanka that is engaged in the business of production, manufacturing, distribution, and selling of commercial visi-coolers and related accessories.

In the domestic market, it has commissioned new production facilities at Prayagraj (UP), Damtal (HP), Buxar (Bihar), and Mendipathar (Meghalaya).

Overall, Varun Beverages is positioned for steady profit growth, operational efficiencies, international market expansion, and segment diversification in 2025 and beyond.

To know more check the Varun Beverages fact sheet and latest quarterly results.

#3 Nazara Technologies

Third on our list is Nazara Technologies.

The company is a leading global gaming and sports media company. It has evolved from an online games portal into India's only listed games company with a diverse portfolio spanning interactive gaming, esports, edu-tech, and gamified early learning.

Nazara Technologies has built a strong brand through organic growth and strategic acquisitions, such as Nodwin Gaming, a major Indian esports organizer, and Paper Boat Apps, an edu-tech company.

The GST 2.0 has imposed a 40% GST on gaming activities, including online money games and betting. However, last month Nazara Technologies had clarified that it has no direct exposure to real money gaming businesses.

As per its latest reported financials for Q1 FY26, the contribution to revenues and EBITDA by real money gaming business was nil.

Nazara Technologies' only indirect exposure to real money gaming is through its 46.07% stake in Moonshine Technologies Private Limited (PokerBaazi).

As Nazara Technologies does not hold a majority stake or exercise control, Moonshine's revenue is not consolidated in the company's financial statements and has no impact on the company's reported revenue or EBITDA.

The contribution to net profits by Moonshine Technologies as share of profit & loss by associate is negative in the first quarter ending 30 June 2025.

The company has invested Rs 8.05 bn towards equity shares in Moonshine Technologies through a combination of cash and stock. In addition, it holds compulsory convertible shares amounting to Rs 2.55 bn.

Accordingly, the company does not anticipate any material adverse impact on its operating financial performance (Revenue or EBITDA).

Nazara Technologies Financial Snapshot (FY20-24)

Source: Equitymaster

On the financial front, the company has reported revenues of Rs 4,988 m for Q1 FY26, which is nearly double from Rs 2,501 m reported YoY. Nazara Technologies reported a net profit of Rs 607 m, which was significantly higher than Rs 243 m YoY.

Moving forward, the company is expanding internationally through strategic acquisitions. Nazara Technologies acquired London-based Fusebox Games for about Rs 2.28 bn in an all-cash deal.

The studio primarily monetises through in-app purchases and has a strong presence in developed markets such as the US, UK, Australia, Canada, and several European countries.

Nazara Technologies subsidiary NODWIN Gaming, a leader in gaming, esports, and youth entertainment, has acquired gaming and esports media company AFK Gaming.

The company is well positioned to benefit from rising internet penetration, smartphone adoption, and youth demand for gaming and esports.

To know more check the Nazara Technologies fact sheet and latest quarterly results.

Conclusion

Many companies may not be impacted severely by GST 2.0 as far as Sin Tax is concerned. While Varun Beverages' impact gets cushioned, there is an insignificant impact on Nazara Technologies.

In most cases, the increase in the final tax burden will likely be passed on to consumers, leading to higher retail prices for these products. However, volumes may see a drop.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...