Abstract The study explores the spillover effects on a commodity market due to GST reforms 2.0, the simplified taxation regime. The reforms triggered a significant downward shift in the prices of essential goods and industrial inputs by reducing the tax burden, which in turn lowers the retail inflation level and boosts the consumption level. It creates a demand for raw material. The commodity market is the primary market responsible for the supply of various raw materials that are essential for various industries, ranging from food processing to steel manufacturing. The GST reforms 2.0 have direct implications for the prices of various commodities. The study considers the base metals for measuring the impact. The study shows that the spillover effect is neutral. The event study revealed that there is an insignificant effect on the abnormal returns of various commodities. The commodity market was market efficient and aligned itself with the structural changes in the tax regime. Therefore, there is no significant volatility in the prices; the market functioned without any favourable or adverse effect. Keywords: Commodity Market, GST, GST Reforms 2.0, Spillover Effect, Event Study, Base Metals. 1.Introduction The government of India has introduced Goods and Services Tax (GST) reforms 2.0 on 22 September 2025. The goods and services tax, being the largest indirect tax contributor to the Indian economy, underwent a critical structural change since the introduction of the GST Act 2017. The GST reforms 2.0 are a next-generation GST reform tactically designed to lower the cost of living while achieving revenue neutrality. Earlier, GST had various slab rates ranging from 5%, 12%, 18%, and 28%; now the slab rates have been modified to 5%, 18%, and 40%. Next-generation reforms subsumed goods and services under various tax rates, which are essential to human well-being, such as packaged food, life-saving drugs, and household essentials, reducing the rates from 18% and 12% to 5%. For electronic and white goods, tax has been reduced from 28% to 18%. Sin and luxurious goods have been increased from 28% to 40% to discourage the consumption of sin goods and achieve revenue neutrality Dr Devarajappa. SN., (2025). Changes in the tax rate have direct implications for the prices of commodities Vora & Patil (2018). The commodity market is one of the primary respondents to any changes in tax structure. It influences the commodity market by altering transaction costs, supply chains, and retail prices. These cause a shift in the demand and market equilibrium. The current paper focuses on measuring the spillover effect due to changes in commodity prices due to modifications in the GST reforms 2.0 slab rate. The paper attempts to evaluate the sensitivity of the return on price of various commodities due to a reduction in the GST slab rate of various goods and services. A reduction in tax rate increases the willingness and affordability of a person to purchase goods and services, which tends to create a demand for raw materials. The commodity market is the place where raw materials are traded, and the impact can be measured immediately. The paper contributes to the literature by capturing the tax reforms and the market transmission mechanism. 2.Review of Literature Qayoom & Ali, (2025) studied the impact of the GST implementation on a commodity market using the GARCH model by comparing the pre-implementation and post-implementation market data. The study exhibited a lower fluctuation after implementing GST, when compared to the pre-implementation period, which contrasted with the moderate fluctuations. It has confidence among investors to invest in the commodity market post-GST enactment. Subsuming various taxes that are under the state and central governments, with diversified rates throughout India, has benefited the stakeholders by easing the complexities created by the earlier regime. Rajamohan (2017) Critically examined the impact of GST on the commodity market and stock market. It revealed that the commodity market was yielding more returns in comparison to the stock market. Implementation of GST reduced expenses through a reduction in multiple taxation and input tax credit. Post implementation of GST, the commodity market has gained momentum for potential investors. Ode, (2025), n.d. Analysed the GST reforms 2.0 and concluded that the reforms are expected to reduce the level of inflation in the economy and will contribute to the gross domestic product of India. It also predicted that there would be a significant increase in the demand for the various products, and manufacturing industries may benefit from the lower cost of raw materials. Obi et al., (2023) studied both commodity market and stock market anomalies and comparative market efficiency between G7 and African markets during the Russia-Ukraine unrest. An event study and an EGARCH model are employed to validate whether the developed market is more efficient or not. Futures prices of crude oil, corn, and wheat are considered in this study, obtained from the Chicago Mercantile Exchange and the US Energy Information Administration. The study revealed a significant market reaction in both markets. Agricultural futures, corn and wheat, had a positive abnormal gain. 3.Statement of the Problem The GST reforms aimed at simplifying indirect taxation and enhancing economic efficiency. But the spillover effect of the reforms on the commodity market is inadequately examined and underexplored. The commodity market operates in an interconnected system and is elastic to the changes in the economy. The existing review of literature revealed a gap in examining the spillover effect on the commodity market due to GST reforms. Hence, the problem lies in examining the spillover effect on prices of various commodities. 4.Scope of the Study The study focuses on capturing the spillover effect on the commodity market during the period of 28 February 2025 to 16 October 2025. It considers Base metals such as aluminium, copper, lead, nickel, steel and zinc to capture the spillover effect from the announcement and implementation of GST reforms 2.0. 5.Objectives of the Study To analyse and measure the spillover effect from the announcement and implementation of GST reforms 2.0 on the commodity market. It helps to quantify the risk transmission and price volatility during the period. It focuses on evaluating the abnormal return due to the tax reforms. 6.Limitation of the Study The study is time-constrained, considering the short-term of around 162 days. The study focuses only on base metals and ignores the volatility of other commodities such as Precious Metals, agricultural commodities, energy commodities, oil and natural gas. 7.Hypothesis H1: The announcement of GST 2.0 Reforms had no significant impact on the prices of commodities. H2: The implementation of GST 2.0 Reforms had no significant impact on the prices of Commodities. H3: There is no significant spillover effect on the commodity market due to the announcement and implementation of GST 2.0 Reforms. 8.Data and Methodology The commodity spot prices of base metals such as aluminium, copper, lead, nickel, steel, and zinc from Multi Commodity Exchange of India Limited (MCX) have been considered for the period from 28 February 2025 to 16 October 2025. The MCX iCOMDEX Indices have been considered for the purpose of measuring market return. The event study model has been adopted to measure the spillover by (MacKinlay-1996, n.d.). On 03 September 2025, the government of India announced GST reforms 2.0 and enforced them on 22 September 2025. The data has been collected for a period of 162 days. Within this period, 120 days are used for the event window to observe price movements and estimate the normal return. The observation period consists of the 10-day pre-event period and the 10-day post-event period, beginning on 03 September 2025 for announcement and the 10-day pre-event period and the 10-day post-event period, beginning on 22 September 2025. Before the analysis of the event, spot prices of aluminium, copper, lead, nickel, steel, and zinc are converted into logarithmic actual returns using the following formula: Ri,t = ln (Pi,t / Pi,t-1) Where i indicate commodity and t indicates day. Ri,t denotes return on commodity, where Pi,t and Pi,t-1 denote current and previous day commodity prices, respectively. After the computation of actual returns, the market model is employed, which uses linear regression to compute expected returns using the formula: E(Ri,t)= α+(β* Rm,t) Where E(Ri,t) denotes expected return, α denotes the price sensitivity of a particular commodity in the market, β denotes the intercept for the commodity, and Rm,t denotes the market return. Abnormal returns are calculated using the following formula: ARi,t = Ri,t – E(Ri,t) Where ARi,t denotes abnormal return. After calculating the abnormal return cumulative abnormal return is calculated using the formula: CARit1t2=t=t1t2ARi,t Where ∑ denotes the cumulative sum. The t-statistic is used to determine the significant difference using: t=CARit1t2iL Where L denotes the length of the event window in days, 𝝈i represents the standard deviation of the abnormal returns of the commodities. Cumulative average abnormal return (CAAR) is calculated using: CARR(t1t2)=1Ni=1NCARit1t2 Where N denotes the number of commodities considered for study. Where CARR denotes the cumulative average abnormal return of base metals such as aluminium, copper, lead, nickel, steel, and zinc, to compare the overall performance of the base metals market. 9.Results The study classifies GST reforms 2.0 into 2 events: The announcement event: On 3rd September 2025, the date on which GST reforms 2.0 is announced. The implementation event: On 22nd September 2025, the date on which GST reforms 2.0 is implemented. The event study analysis is done for ea
K et al. (Wed,) studied this question.