The Indian brokerage house Motilal Oswal has hailed the new GST rate overhaul as the first big measure from the government to boost consumer sentiment. They see these measures as supporting growth and encourage longer-term capacity building to drive the economy toward greater self-reliance in a volatile and uncertain global scenario.
Simplification of GST was the central idea
According to Motilal Oswal, the apparent centrepiece of these reforms is the rationalisation of the complex four-tier rate structure (5%, 12%, 18%, 28% – with cess in some cases) to a simplified two-tier rate structure (5% and 18%) with a separate 40% rate for select items categorised as sin or luxury goods.
Motilal Oswal: Impact on fiscal balance
According to Motilal Oswal, “the overall fiscal impact is manageable with a likely net hit of Rs 48,000 crore, estimated the Finance Ministry.” The government has a strong track record of fiscal rectitude, and most times, its estimates have been conservative, hence inspiring confidence. “Moreover, the government has several levers to improve receipts in case the fiscal impact of the approved measures turns out higher than estimated,” stated Motilal Oswal.
Government focusing on ease of doing business
The government is focusing on the ease of doing business and ease of living by bringing in several structural reforms in the GST structure and streamlining various processes. New GST rates will become applicable for most products or services from September 22, thus striving to pass on the benefits to end consumers during the festive season.
Motilal Oswal: Sectors to benefit from GST-rate reforms
Motilal Oswal said that the approved measures are likely to yield economy-wide benefits and favorably impact several sectors.
The major sectors that will benefit from the revamp are automobiles, Consumer Durables, Consumer Staples, Cement, Hotels, Insurance, Retail, Renewables, and Oil & Gas (benefits through CNG cars).
However, there are a few sectors that will reap benefits from the reforms but not directly. For example, banks and NBFCs will be beneficiaries of better consumption demand, logistics and quick commerce due to higher volumes, and electronics manufacturing services (EMS) because of better demand for ACs.
Motilal Oswal: Top stocks to benefit from GST overhaul
The brokerage firm picked Maruti Suzuki, M&M, Ashok Leyland, Hindustan Unilever, Britannia, Varun Beverages, Ultratech Cement, JK Cement, Havells, Voltas, Amber Enterprises, Metro Brands, Trent, Lemon Tree Hotels, Indian Hotels, Niva Bupa Health Insurance, HDFC Life Insurance, Indraprastha Gas, ACME Solar, Suzlon Energy, Swiggy, Delhivery, ICICI Bank, HDFC Bank, Bajaj Finance, and Shriram Finance.