If you actively trade in the stock markets you would have already seen the decent run up that some of the stocks are having as the positive news on the GST is pouring in. These stocks actually belong to the sectors which are going to benefit with the GST becoming a reality in the near future. With a high probability of the GST bill getting passed in the Rajya Sabha in the current parliamentary session ending on 12th of August, the market is already discounting the news through a hike in the prices of the shares in the beneficiary sectors.
The number of companies and sectors that will gain with the implementation of the GST is likely to be higher than the losers. This will be especially so in the sectors that are dominated by unorganised players, as the GST bill will shrink differential tax rates and increase tax compliance. The prominent sectors that are being talked about as the gainers are realty, automobile, consumer goods, and logistics etc.
Infrastructure: The construction and building materials industry will benefit from the difference between the current effective tax rate and the proposed GST rate. With the excise duty and VAT the cement, ceramics, and even paint companies are paying a tax of 24.5% which is likely to come down to 18% in the GST regime. This sector is having a dual benefit in the form of the infrastructural push by the government and the GST bonanza and is reaping the gains in the form of steadily rising stock prices.
FMCG: Similar GST benefits are seen for the consumer goods and durables industry. The FMCG industry will see the gains coming directly from the GST rate differential in addition to the benefits from the supply chain and logistic front. The consumer companies will welcome the GST rate pegged at 18 per cent levels versus the current tax rate of 22-23 per cent. The consumer durables sector which has a high incidence of logistics costs amounting to around 7.5 per cent of sales will save around 30 per cent of it.
Automobiles: The stocks of two wheelers, cars, SUV, and commercial vehicle manufacturers are buzzing with activity. The gains in the value of these stocks can be understood from the tax differential benefit that is likely with the GST implementation. Whether it is the two-wheelers or the four wheelers they all bear the brunt of high taxation that adds up to 25-26 per cent. The figure is significantly higher at 35 to 45 per cent when it comes to Sports Utility Vehicles (SUVs) and midsized cars.
DTH: It will be a mixed bag for the telecom sector. We pay a tax of 15 per cent on our phone and data card bills which will go up while the DTH players and cable companies that pay 23 to 25 per cent will see a reduction.
Transport: The logistics sector is being seen as a major beneficiary among the bullish sectors. All the companies in the logistics sector will benefit while the larger toll players will have an indirect impact. The traffic movement will be significantly up given the increased profitability of the truckers.
Once the GST bill is passed, further clarity will emerge with the date of implementation of the new indirect tax. As the economy will move towards the GST regime the sectors that come out as clear winners will be distinctly visible.