Strategy: GST: The final lap - Kotak

GST: The final lap. The GST rates for 1,211 products do not show any major deviation from the current effective tax rates except in the case of a few consumer products. The GST council has tried to mitigate the inflationary impact of GST by keeping rates for most items near or below the current effective tax rate. Also, it would be best to assume that most rate changes will be passed on to consumers. The council will decide on the balance rates and the GST rate for services on May 20.

Most sectors will see marginal to slightly positive impact

The GST rates of various sectors are decided by the GST council. The council has not decided upon the rates for categories such as 'bidis', biscuits, footwear, precious metals & jewelry, textiles. Key categories where rates will be higher than the present effective tax rate are two-wheelers, small cars, cement, fruit juices and chocolates. Most primary food articles like cereals, meat, fish and vegetables have been kept in 0-5% tax bracket as expected.

FMCG companies stand out as key beneficiaries—CLGT, HUVR and PIDI

Most personal care products will be taxed at 28% except hair oil, soaps and toothpaste, whose tax rate is 18%. Among food and beverage items, aerated water, chocolates, chewing gum, malted food drinks will be taxed at 28%, cakes, cornflakes, jams at 18% while the rest will be between 5% and 12%. Adhesives will be taxed at 18% but paints and varnishes at 28%.

Higher tax rates for automobiles, cement, building products and consumer durables

The GST council has fixed a 28% GST rate for passenger vehicles including two-wheelers while mid-sized cars and SUVs will attract further cess. GST rates for commercial vehicles and tractors are at 28% and 12%, in-line with existing indirect tax rates. GST rates for cement are also at the highest slab of 28%, which is higher than the current 23-26% rates. The same rate is applicable for tiles, ceramics and sanitary-ware versus the current tax rate of 18-24%. The rate for consumer durables such as ACs, fans, refrigerators is at 28%, on expected lines.

Metal-ores, minerals are at the lower end; so are pharmaceutical products

The minimum tax rate of 5% will be levied on ores of various metals such as aluminum, copper, iron as well as coal, coke and lignite. Kerosene (PDS) and LPG (for households) are also to be taxed at 5%. In the same vein, apart from nicotine gum (18%), all the other pharmaceutical products are to be taxed below 18%.

Limited impact on companies and inflation; transition rules awaited

In our view, GST rates in most cases are in line with the prior rates/expectations set by the government in previous briefings. As highlighted before, the anti-profiteering clause may prevent companies from retaining the benefit of lower GST rates versus current effective tax rates. Automobile and cement companies will likely pass on the higher taxes to consumers. Lastly, we do not see any major impact of the new tax rates on inflation.

Shares of 20 MICRONS LTD. was last trading in BSE at Rs.40 as compared to the previous close of Rs. 40.55. The total number of shares traded during the day was 13709 in over 88 trades.

The stock hit an intraday high of Rs. 41.5 and intraday low of 39.95. The net turnover during the day was Rs. 552096.

Source : Equity Bulls

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