GST Rates Get A Thumbs-Up From Most Brokerages
Brokerage houses say FMCG companies stand to gain the most under GST.
The tax rates fixed by the Goods and Services Tax (GST) Council will not lead to any flux in equity markets as the new indirect regime will make doing business in India easier, brokerages said.
As per the rates fixed by the council in its recent meeting in Srinagar, most products will be taxed at a similar or lower rate once the indirect tax regime is rolled out. A few services like movie tickets and telecom services may cost more.
Morgan Stanley
The direct implications of the GST rates, which were announced last week, will be minimal and a positive for sectors such as consumer staples and media, according to Morgan Stanley.
Most of the items in the consumer-price inflation basket are likely to be taxed lower under GST as compared to the existing regime, Morgan Stanley India said in a report. However, companies may pass on the costs of increased tax burden to the consumers, it added.
The final impact will depend on the trends in aggregate demand and output gap following the implementation of GST.Morgan Stanley Report
GST is expected to be a positive for consumer staples and media industries, while it would be a negative for airlines and oil and gas companies, Morgan Stanley said.
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Motilal Oswal
The council has struck a fine balance in ensuring that the rates are not inflationary, said the brokerage house in its report. This coupled with most products and services being taxed at the existing or lower rate augers well for equity markets as well, said Motilal Oswal.
The markets will wait for the date of implementation, said the brokerage house.
Key Gainers
Fast moving consumer goods companies are expected to be the key beneficiaries, said Motilal Oswal, with soaps, toothpaste and adhesives being taxed at a lower than the existing rate under GST.
Antique Broking
The brokerage house says while there are positive surprises on mass consumption products, it may be disappointing for certain service verticals like insurance and telecom.
Kotak Institutional Equities
The brokerage house said it expects companies to pass on the change in tax rates to the consumer, and highlighted that the council has tried to mitigate the inflationary impact of GST by keeping most rates closer to or lower than the present levy.
FMCG companies, said Kotak Institutional Equities, are going to be the key beneficiaries of GST. The anti-profiteering clause will also force these companies to pass on the benefit to consumers, said the brokerage house.
Angel Broking
The new indirect tax regime should be looked at in its entirety, said the brokerage, as it brings simplicity to business, making trade simpler across the country.
Logistics will take centrestage once GST is rolled out, said Angel Broking, leading to value discovery as companies look to build on the backend.
