Published on 9/11/2017 2:22:10 PM | Source: Motilal Oswal Securities Ltd
GST: Rate recalibration likely - Motilal Oswal
Consumers, light electrical and home building may benefit
The GST Council in its 23rd meeting, which is scheduled to commence on 10th November 2017, is likely to make sweeping changes to the GST framework, with an aim to (i) ease the compliance burden for small businesses and (b) recalibrate the tax rates on many common-use goods that fall under the 28% slab. We believe that the Council might look to lower rates for items in the consumer, light electrical and home building sectors. In our view, this should positively impact companies like HUL, GCPL, Nestle, Asian Paints, Berger Paints, Kansai Nerolac, Titan, Bata, Havells, Crompton Consumer, Finolex, V Guard, Kajaria Ceramics, Somany Ceramics, Century Ply, and VIP industries, among others.
Major overhaul in GST rates expected
* GST has consolidated all indirect taxes into a single umbrella, and categorized them into four broad slabs (5, 12, 18 and 28%), along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks.
* As of now, 200+ items fall in the 28% slab, which include common-use and luxury items.
* The fitment committee (a panel that proposes GST rates for goods and services) is preparing a list of items, for which rates could be reduced after assessing revenue implications.
* Our discussions with some of the tax experts highlight that the intent is to recalibrate the GST rates for (a) common-use items and (b) items manufactured by SMEs.
* By making changes to the GST framework, the Indian government is attempting to address the concerns facing the SMEs post the implementation of the new tax system. We believe the reduction in rates will be a significant step toward tax simplification to support the trader community.
Consumers, light electrical and home building to be major beneficiaries
* We believe that among the items being taxed at 28%, paints, detergents, shampoo, hair color, coffee, detergent, luggage, footwear, watches, fans, switches, wires and cables, tiles and plywood may now come under a lower tax bracket.
* This is likely to benefit companies like HUL, GCPL, Nestle, Asian Paints, Berger paints, Kansai Nerolac, Titan, Bata, Havells, Crompton Consumer, Finolex, V Guard, Kajaria Ceramics, Somany Ceramics, Century Ply, and VIP Industries, among others.
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