Cess hike breather for automobile companies, removes hangover on the stocks: Angel Broking

Views of Mr. Shrikant Akolkar (Research Analyst- Automobiles, Angel Broking):

"The cess rates announced by the government on the mid size, large cars and UVs have come as a breather to the automobile industry. Earlier government had notified of hiking the cess rates from 15% to 25% which could have impacted the demand for the mid and large sized cars. The new cess rates on mid size cars are 17%, large cars 20% and utility vehicles 22%. The total tax incidence (GST + cess) on mid and large sized cars after new cess rates has increased by 0.5% if compared to the pre-GST rates, while the same for the utility vehicle is down by 1.5%. This we believe will be demand neutral exercise as there is no much difference in the rates in both the tax regimes. The UVs were in higher tax bracket in the earlier tax regime, and we don't expect any change in the demand environment post the new cess hike. We continue to maintain positive stance on the automobile sector considering lower interest rate environment, strengthening rural economy and improving demand."

Source : Equity Bulls

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