GST Big Bang Impact On Your Stocks
“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”
Yes, just follow this investment secret revealed by none other than Warren Buffett himself. You will find yourself a great investor in stocks and soon move on the path to riches. Investing in stocks can be very dangerous if you forget something very important. Remember to do your research before investing in stocks.
Something very big is happening in the Indian Economy. A single indirect tax for India called Goods and Services Tax or GST will be implemented from July 1st 2017. This is a game changer in the Indian economy and could solve India’s inflation problem once and for all.
How GST Impacts Your Stocks?
1. GST is great for the FMCG Sector
Let’s take a look at some of the common items you use and consume in day to day life. Milk, vegetables, fruits, eggs, rice, wheat, pulses, curd, natural honey, bread, jaggery and chicken. All these fall in the GST 0% tax slab. The Government has exempted these products from tax to cut down inflation. Expect the prices of these products to fall down.
Sugar, Tea, Coffee, Mithai (Indian Sweets), Edible Oil, spices, skimmed milk powder, pizza bread, rusk, fish fillets and branded paneer fall in the GST 5% slab. Items you commonly use like hair oil, soaps and toothpastes used to be taxed at around 22-24%. These items will fall in the GST 18% tax slab. Expect prices of hair oil, soaps and toothpastes to fall.
Most of the items used by you and the common man fall in the GST 0% and 5% tax slab. The FMCG industry sells a lot of these products. Don’t you think FMCG stocks will do well?
2. Stocks of players in consumer durables could rise
Planning to buy television sets, AC’s, refrigerators or washing machines popularly known as consumer durables after July? Consumer durables fall in the GST 28% tax bracket. These products used to be taxed at 23-28% depending on the State. Expect the prices of AC’s, refrigerators, television sets and washing machines to go up by 4% or more.
Many consumer durable companies might increase the prices of their products once GST comes out. GST will pull more and more companies under the organized sector. Expect stocks of organized consumer durable companies to go up, as unorganized players lose advantage.
3. Logistics stocks could shoot up
The logistics and warehousing sector is the dark horse which could see immense gains from GST. After GST, inter-state transportation of goods would become very efficient. Logistics companies are moving from traditional set-ups and adopting IT and technology to reduce costs and meet rising demand.
Why would logistics stocks gain from GST? After GST, time spent on state borders would fall as unnecessary tax checks are eliminated. This would save fuel and time to reach the destination. Logistic stocks would be the big gainers of GST.
Those who are not so lucky
1. Tyre Industry could see tough times after GST
After GST the tyre industry has some good news and some bad news. The good news is that natural rubber is taxed at a GST slab of 5%. The bad news is that synthetic rubber is taxed at a GST slab of 18%. The rubber industry needs both, natural rubber and synthetic rubber.
The rubber industry wants both natural rubber and synthetic rubber to be taxed at 5%. A higher tax would make tyres manufactured in India more costly.
2. GST has put brakes on the Solar Sector
Solar modules are very important for the generation of solar energy. But, solar modules fall in the GST slab of 18%. This has put brakes on the sizzling hot solar sector. Coal falls in the GST slab of 5%. How will solar power be able to compete with coal based electricity?
In the short term, solar industry could face tough times. The cost of solar projects could rise by 18% and cost of generation as high as 20%. Solar industry will do well in the long term, but face problems in the short term. Expect some pain in the solar sector.
Yes, GST will have a big impact on your stocks. You need to study its impact before you invest in the stock market. Do your research and pick stocks wisely. Be Wise, Get Rich.
This is to informs readers to know that the views, thoughts, and opinions expressed in the text article/ opinion belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.
This is not consultancy or information of any law, it’s only the views of the author on which GSTSEVA.COM has no control.