The single tax would replace 17 indirect tax charges and improve taxation efficiency. Most goods are placed under the four slots of service tax i.e. 5, 12, 18 and 28 percent.
The GST (Goods and Services Tax), which is expected to play an important role in improving growth in Asia’s third-largest economy is expected to boost earnings of many companies in sectors which have a high presence of an unorganized market.
We have created a list of 5 stocks which analysts think could benefit the most from the implementation of GST.
- Prabhat Dairy
Value added products of the company are cheese, condensed milk, ghee and dairy powder. Non value added products are liquid milk. Net debt is approx. Rs. 250 crore. Capacity utilization of cheese is present approx. 18020%.
The management expects an increase in capacity utilization for the cheese to be 40-50% for coming year. Approx 65-70% of milk procurement is direct. The company is present in both B2B and B2C segment with contribution 70% and 30% respectively.
It plans to contribute in ratio 50:50 from both by 2020. The company plans to increase its distribution network from 25 states in the B2C segment to be a pan-India player.
Milk, food grains and other articles of daily use are exempted from taxation under the GST schedule, which would give a nice boost to the company.
- Godrej Industries
The company has shown good quarter earning with great growth in the majority of the businesses. Major contributors to the growth have been the chemicals, consumer and real estate businesses.
The management expects in FY18, implementation of GST would give strong momentum for a lot better economic environment and stronger client demand.
Anxiety over the GST rates has been an overhang on the stock for quite some time. The final GST rates with a cap on Cess leads to a lower incidence of taxes as compared to the current effective tax rate. Leadership position in cigarette category, constant investment in innovations and brand building in other FMCG business will also drive the business growth.
- Dabur India
Most of the Dabur hair oils and soaps fall under lower tax slab of 18% compared to the current effective rate of 26-28%. The largest segment honey will continue to be under the exempt category.
- Hindustan Unilever
Hindustan Unilever (HUL) is expected to gain market share after GST as business moves from unorganized to organized segment. HUL will benefit from moving to a moderately lower 18% tax slot and its major raw materials- consumer staples falling in the lowest tax slot (0-5%).
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