Impact of Financial Literacy and GST Reforms on Investment Behaviour of Millennials and Generation Z Investors Exploring Sectoral Opportunities and Challenges

Abstract Financial literacy and tax reforms are major factors influencing investment behavior in today's financial markets. In India, the Goods and Services Tax (GST) was implemented in 2017 as a major economic reform intended at simplifying the indirect taxation system, increasing transparency, and improving company efficiency. At the same time, Millennials and Generation Z have emerged as important investment groups as a result of the proliferation of digital financial platforms and enhanced access to financial information. Understanding how financial expertise and economic reforms affect the investment decisions of young investors has thus become critical. This study investigates the influence of financial literacy and GST reforms on the investing behavior of Millennials and Generation Z investors, with a particular emphasis on sectoral possibilities and difficulties provided by GST reforms. The study combines a descriptive research design with primary data obtained from 98 respondents via a structured questionnaire. Statistical methods such as descriptive statistics, Cronbach's Alpha, correlation analysis, and regression analysis were used. The findings show that financial literacy has a considerable positive impact on investment behavior by enhancing understanding of financial concepts, risk management, and diversification. Awareness of GST reforms influences investor perceptions of economic stability and sectoral growth. According to the report, GST reforms have offered new growth prospects in areas such as logistics, manufacturing, e-commerce, and fintech. The findings support policy recommendations that are consistent with Viksit Bharat's goal, emphasizing the importance of financial education and understanding of economic reforms in fostering responsible investment behaviour among young investors. Keywords: Financial Literacy, GST Reforms, Investment Behaviour, Millennials, Generation Z, Sectoral Opportunities, Economic Policy 1.Introduction Investment behavior is the process by which people distribute their financial resources among various financial instruments such as stocks, mutual funds, bonds, and other investment options. Understanding investing behaviour is important because it reveals how people make financial decisions based on their financial knowledge, economic situations, and risk/return assumptions. Individual investors' participation in financial markets has expanded dramatically in recent years as a result of technical improvements and the proliferation of digital investing platforms. Millennials and Generation Z have emerged as significant players in the financial markets. These generations are technologically savvy and have easier access to financial information via internet platforms and digital media. As a result, their interest in investing activities such as stock trading, mutual funds, and digital financial services has grown significantly. However, financial literacy, economic policy, and market awareness all have an impact on their investment decisions. Financial literacy is essential in helping people comprehend financial concepts including savings, risk management, diversification, and financial planning. Individuals with increased financial literacy are better able to analyze financial data, assess investment opportunities, and make sound financial decisions. They are also better equipped to understand government policies and economic reforms that affect financial markets. The Goods and Services Tax (GST) was implemented in 2017 as one of India's most significant economic reforms, with the goal of simplifying the indirect taxation structure and increasing transparency. GST has influenced a variety of industries by increasing efficiency and lowering tax cascading. From the standpoint of investors, these reforms have an impact on sectoral growth and economic stability, which influences investment decisions. As a result, it is critical to investigate how financial literacy and GST reforms influence the investing decisions of Millennials and Generation Z investors. 2.Overview of GST Reforms in India The Goods and Services Tax (GST), which was implemented in India on July 1, 2017, is a comprehensive indirect tax reform aiming at streamlining the taxation system and establishing a single national market. Prior to GST, several taxes like VAT, service tax, and excise duty created complexity, tax cascading, and compliance issues. GST replaced these with a single system, thereby increasing transparency, efficiency, and simplicity of conducting business. Since its inception, changes like as the Input Tax Credit (ITC) mechanism, digital compliance via GSTN, e-invoicing, and streamlined return filing have enhanced the system. These policies have increased tax compliance and reduced evasion, as evidenced by higher GST collections, indicating greater economic activity. GST reforms benefit investors by improving economic stability and sectoral efficiency, which influences corporate performance and creates new opportunities. Millennials and Generation Z investors frequently evaluate policy-driven sectors growth when making investment decisions, hence GST is a significant aspect in understanding investment behaviour. 3.Role of GST Reforms in Influencing Investor Behaviour The adoption of the Goods and Services Tax (GST) has drastically impacted India's economic and commercial climate by streamlining the indirect tax structure and increasing transaction transparency. GST reforms have increased tax efficiency, decreased cascading effects, and improved supply chain operations, resulting in more formalization of corporate activity across industries.Investors view tax reforms as having an impact on firm profitability, sectors growth, and overall market performance. Investors frequently assess the impact of these policies on various industries before making investment decisions. Financially educated investors can better comprehend the consequences of GST reforms and discover sectoral opportunities that arise as a result of these changes. As a result, GST revisions have a significant impact on investor confidence and the investment behaviour of Millennials and Generation Z investors.Conceptual Framework GST Factor What GST Changes Impact on Investment Behaviour Behavioral Aspect Involved Disposable Income Changes in prices of goods Lower GST → more savings → higher investment Risk aversion, consumption preference Consumption Pattern Shift in spending habits due to tax rates Increased spending reduces investible surplus; reduced spending increases investments Spending vs saving bias Formalization of Economy Reduction in cash/black money transactions More money enters banking system → increase in financial investments (stocks, MF, insurance) Financial awareness, trust Business Profitability Input tax credit, reduced cascading taxes Higher profits → increased corporate investment; improved investor confidence Optimism, confidence Sectoral Growth Different GST rates across industries Investors shift funds to low-tax/high-growth sectors Herding behaviour Compliance Burden GST filing and regulatory requirements Small businesses become cautious → reduced investment Risk perception Market Transparency Better tax structure and reporting Increased trust → more participation in financial markets Investor confidence Initial GST Uncertainty Policy changes and implementation issues Short-term decline in investment due to fear and uncertainty Loss aversion, uncertainty avoidance Digital Transactions Growth Push towards online payments Increase in digital investments Tech adoption behaviour Financial Literacy Impact Awareness of taxation system improves Better decision-making and diversified investment choices Rational decision-making The study's conceptual framework explains the connection between Millennial and Generation Z investors' investment habits, GST reforms, and financial literacy. Investor awareness and financial decision-making are thought to be influenced independently by GST reforms and financial literacy. Investors with financial literacy are better able to comprehend financial concepts, evaluate risks, and effectively analyze investment opportunities. In a similar vein, investor confidence may be impacted by GST reforms' effects on sectoral growth, business performance, and economic transparency. Investors are better able to identify sectoral investment opportunities and make informed financial decisions if they have a higher level of financial literacy and are aware of the GST reforms. As a result, Millennial and Generation Z investors' investment decisions are influenced by all of these factors. Hypothesis Development Based on the conceptual framework and the theoretical discussion, the following hypotheses are proposed: H1: Financial literacy has a significant influence on the investment behaviour of Millennials and Generation Z investors. H2: GST reforms have a significant influence on the investment behaviour of Millennials and Generation Z investors. H3: Financial literacy and GST reforms jointly influence the investment behaviour of Millennials and Generation Z investors. 4.Review of Literature 1. Bongomin et al. (2017) examined the relationship between financial literacy and financial inclusion in emerging economies, emphasizing how financial education improves people's ability to engage in financial markets and manage resources effectively. The findings show that financial literacy enhances financial behavior and increases savings and investing activities, highlighting the significance of financial education in improving financial decision-making. 2. Garg and Singh (2018) investigated the level of financial literacy among youth and its influenc