Article

What GST Holds in Store for Stocks in Different Sectors?

11 Jul 2017 Sumit Kati

This is a landmark moment in the history of Indian economy. In the past month, the government has made much headway in implementing the Goods and Services Tax (GST). However there is a lot of speculation among people about the effects of this move.

The GST rates announced by Finance Minister Mr. Arun Jaitley was a mixed bag. Some tax rates were on expected lines, while others surprised the markets. For instance, lowering of tax on coal and capital goods came in as a big surprise for the market. 

This game-changing reform is about to define market trends in the country for the foreseeable future. We decided to take a peek to see what the future might hold in store for company stocks in different sectors.

Sector 1# Fast Moving Consumer Goods
This sector received a massive boost from the Government’s tax reforms. The focus seems to be on keeping taxes low on mass consumer goods. While milk, grain and cereals are altogether exempt from GST, other products like sugar, tea, coffee and edible oil will attract just 5% GST. 

Future Impact:
Experts forecast a bright future for companies in the FMCG sector like Nestle, Marico, Dabur and Colgate. 

Sector 2# Consumer Durables and Capital Goods
The impact of GST has been a  mixed bag for the capital goods and the consumer sector. While Industrial capital goods will attract 18% GST instead of 28%, some consumer durable goods will attract higher tax. The GST Council has put items like refrigerators, ACs and fans in the maximum 28 per cent category. This is bound to increase prices of these products.

Future Impact:
Experts concede that there will be a hike in prices of AC’s, fans and such products. Voltas, Havells and CG Consumer may benefit eventually as the GST will in a way level the playing field for all the companies in this market. 

Sector 3# Automobiles
Cars will attract GST at the top rate of 28 per cent with additional cess on top of it. Luxury cars will attract a cess of 15%, small petrol cars will face 1% cess, and small diesel cars 3% cess. The cess on bigger cars was very well on the cards, but the cess on smaller cars is a surprise for markets. This hike could be a result of the 2% rise in excise duty in the last few yew years.

Future Impact:
Because of the current tax reforms, SUV manufacturers like Mahindra & Mahindra will not be affected much as their tax incidence was the same as before. The same goes for heavier automobile manufacturers like Eicher.

Sector 4# Multiplexes and Cinemas
The GST Council, led by Finance Minister Arun Jaitley, has fixed rate on movie tickets at 28 per cent, the highest rate slab which is also applicable for casinos and five-star hotels. The reason for this high tax rate is to counter the entertainment tax that ranged between 28% to 100% which changed state-wise. However, most multiplex operators are unhappy with this decision.

Future Impact:
There is a certain sense of disappointment over the new tax rates. These companies will be quite unhappy with the new reforms since they have been bracketed, with gambling and betting activity, at the highest tax bracket.

Sector 5# Service Sector
As per the current Service Tax statutes, tax is imposed at a flat rate of 15% across all services. The GST on services will come under four slabs of 5%, 12%, 18% and 28% exactly like the GST on goods.

Future Impact:
GST will be just 5% on economy flying, which will help airline companies like SpiceJet and Indigo give a bigger push to the Udaan program.

These are the effects of GST in some of the major sectors and how it will affect the stocks in the near future. Check out 5paisa.com to gain a better understanding on GST and its effects on the stock market. Their guidance can help you choose the right stocks and secure your investments.

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What GST Holds in Store for Stocks in Different Sectors?

11 Jul 2017 Sumit Kati

This is a landmark moment in the history of Indian economy. In the past month, the government has made much headway in implementing the Goods and Services Tax (GST). However there is a lot of speculation among people about the effects of this move.

The GST rates announced by Finance Minister Mr. Arun Jaitley was a mixed bag. Some tax rates were on expected lines, while others surprised the markets. For instance, lowering of tax on coal and capital goods came in as a big surprise for the market. 

This game-changing reform is about to define market trends in the country for the foreseeable future. We decided to take a peek to see what the future might hold in store for company stocks in different sectors.

Sector 1# Fast Moving Consumer Goods
This sector received a massive boost from the Government’s tax reforms. The focus seems to be on keeping taxes low on mass consumer goods. While milk, grain and cereals are altogether exempt from GST, other products like sugar, tea, coffee and edible oil will attract just 5% GST. 

Future Impact:
Experts forecast a bright future for companies in the FMCG sector like Nestle, Marico, Dabur and Colgate. 

Sector 2# Consumer Durables and Capital Goods
The impact of GST has been a  mixed bag for the capital goods and the consumer sector. While Industrial capital goods will attract 18% GST instead of 28%, some consumer durable goods will attract higher tax. The GST Council has put items like refrigerators, ACs and fans in the maximum 28 per cent category. This is bound to increase prices of these products.

Future Impact:
Experts concede that there will be a hike in prices of AC’s, fans and such products. Voltas, Havells and CG Consumer may benefit eventually as the GST will in a way level the playing field for all the companies in this market. 

Sector 3# Automobiles
Cars will attract GST at the top rate of 28 per cent with additional cess on top of it. Luxury cars will attract a cess of 15%, small petrol cars will face 1% cess, and small diesel cars 3% cess. The cess on bigger cars was very well on the cards, but the cess on smaller cars is a surprise for markets. This hike could be a result of the 2% rise in excise duty in the last few yew years.

Future Impact:
Because of the current tax reforms, SUV manufacturers like Mahindra & Mahindra will not be affected much as their tax incidence was the same as before. The same goes for heavier automobile manufacturers like Eicher.

Sector 4# Multiplexes and Cinemas
The GST Council, led by Finance Minister Arun Jaitley, has fixed rate on movie tickets at 28 per cent, the highest rate slab which is also applicable for casinos and five-star hotels. The reason for this high tax rate is to counter the entertainment tax that ranged between 28% to 100% which changed state-wise. However, most multiplex operators are unhappy with this decision.

Future Impact:
There is a certain sense of disappointment over the new tax rates. These companies will be quite unhappy with the new reforms since they have been bracketed, with gambling and betting activity, at the highest tax bracket.

Sector 5# Service Sector
As per the current Service Tax statutes, tax is imposed at a flat rate of 15% across all services. The GST on services will come under four slabs of 5%, 12%, 18% and 28% exactly like the GST on goods.

Future Impact:
GST will be just 5% on economy flying, which will help airline companies like SpiceJet and Indigo give a bigger push to the Udaan program.

These are the effects of GST in some of the major sectors and how it will affect the stocks in the near future. Check out 5paisa.com to gain a better understanding on GST and its effects on the stock market. Their guidance can help you choose the right stocks and secure your investments.