GST, India's most ambitious tax reform since Independence took a giant leap after Centre and States agreed on the tax rate structure this week. At present, there are 15-20 tax slabs between the Centre and states. Coal, luxury and sin goods like cigarettes and alcohol will attract cess in addition to the GST.
New GST Tax Structure: Here Is What Gets Cheaper And Expensive
The GST Council had agreed to zero-rating for nearly half the items in the consumer price index (CPI) basket as well as major food grains, while goods of daily use would attract 5% GST, as against 6% proposed previously.
Also, there will be two standard rates of 12% and 18%; a move meant to blunt the demand for a standard 18% tax. White goods and similar products will face 28% levy, instead of 26% suggested by the Centre earlier.
The cess on luxury and sin goods, and the clean energy cess on coal should aid the Centre to mop up around Rs 50,000 crore to reimburse states for any revenue loss due to GST.
Soaps and oil may get cheap
While tobacco presently attracts 65% tax, the current rate on aerated drinks is around 40%. Also, some products such as soaps, oil and shaving sticks, which would have gone into the 28% bracket, will now shift to the 18% slab. This will make them cheaper.
Mobile bill, insurance service charge and eating out to be expensive
It is likely that services will be pushed above the current 15% tax. In all likelihood it will move to the 18% bracket, which means mobile bills, dining out and insurance services could all get more expensive. So, think and use services, as these are likely to be higher.
Luxury Cars and SUVs don't get cheaper
Luxury cars and big SUVs will not be cheaper with the realization of GST.
Though the crest rate of 28% under GST is lower than the taxes that bigger cars currently pay, the additional cess will hike up the prices. Experts say that the level of tax on smaller cars will have to be at a disparity to the sedans.
India is a principally small-car market because of the taxation structure and excise duty.
Currently, a small car evokes 12.5% excise duty.
Highest excise of 30% is imposed on multi utility vehicles (MUVs) and SUVs.
In addition to excise, vehicles also attract value-added tax and road tax at the state level that are higher on sedans, SUVs and luxury cars.
How will GST affect the Stock portfolios?
Market insight on the impact of the Goods and Services Tax (GST) is expected to see a marked shift after the government announced a four-tier rate structure on Thursday. Market participants are likely to see the GST as a vital tax reform, rather than a demand booster for many consumer elective products.
The new structure is likely to bring efficiency gains, lower logistics costs and higher compliance for companies which operate in largely unorganized sectors.
Stocks that will benefit
Besides these key sectors, there are some prominent companies which would gain amply from the four-tier structure of GST. To name some, Exide Industries, Crompton Greaves, Bata India, PVR, Supreme Industries, Greenply, Symphony, and Cera will remain the Beneficiaries. These companies operate in the sectors with a large number of unorganized players.
(The above article is written by Tanaya Nath of Dynamic Levels. The company is a member of the BSE and NSE.)