Shares of companies across sectors have adjusted to the new GST rates on the basis of whether these rates are higher or lower as compared to the existing ones. Stocks of companies where GST rates are higher fell in the past two days, while shares rose for companies whose products attract lower rates.
Shares of consumer goods, including ITC, HUL, Britannia, Marico and Dabur, gained in the range of 2% to 9% after the GST rates were announced, as the sector is seen as the biggest beneficiary of the new tax regime. While the rally in ITC can be attributed to the lower-than-expected levy on cigarettes, consumer staples including milk, grain, and cereals which were exempted from the new tax regime also boosted the investor sentimsent.
The rally in these stock helped the BSE FMCG index to close at its record high of 9924.68. The index gained 3.09% on Monday.
The share price of ITC which rose by 9.2% in the past two sessions, added Rs 31,000 crore to its market capitalisation. On Monday, the share price of ITC rose by 6.21%. The scrip contributed 164 points to the Sensex and helped the gauge close higher.
In a note to investors, Jefferies said though cigarettes have been put in the highest tax slab of 28% the slab in the GST regime, with an additional 5% cess and another based on varying length, the overall tax impact is going to be neutral.
Similarly, the share price of United Spirits surged by 7.35% on Monday as alcoholic beverages for human consumption was exempted from the GST. However, inputs such as extra neutral alcohol and packaging are included. Glass bottles have been categorised in the 18% bracket against the earlier rates of 15-16%, while molasses has been classified in the 28% bracket.
Jefferies said molasses-based extra neutral alcohol contribute 30% of volumes for United Spirits and increased prices of glass bottles and molasses would require price increases. “While the in-house manufacturing of ENA won’t make any difference in the GST regime, companies looking to outsource ENA manufacturing like United Spirits would face increased cost pressures,” the note said.
The share price of Dish TV fell by 2.25% as the GST rates on DTH and cable services were raised from 15% to 18%. Similarly, the share price of Maruti Suzuki fell by 2.02% as the GST rates for small petrol cars and compact SUVs were raised from 24.4% to 28%. Shares of Bajaj Auto also fell by more than 2% in the past two sessions.
Share prices of Ultratech and ACC fell by 1.85% and 2.6%, respectively in the last two days as the GST rate for cement was raised to 28% from 23-25%.
However, the revision in tax rates brings an additional benefit, as the GST on coal and metal ore has been reduced to 5%. Market participants said earnings impact would not be much as cement companies might go for a price hike.