GST: Here Are 10 Stocks That Will Benefit From Biggest Tax Reform

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Indian stock markets have rallied sharply in the run-up to the passage of the Goods and Services Tax (GST) Bill. The GST will replace a number of indirect taxes and levies in 29 states, transforming Indian into one market. Analysts say the move could boost India’s economic growth by up to 2 percentage points.

Here are 10 stocks that will benefit from the implementation of GST:

1) Hero MotoCorp: The 8 per cent reduction in on-road prices for entry (HF Dawn/Deluxe) and executive (Splendor/Passion) categories would improve affordability and expand the addressable market for this price-sensitive segment.

2) Maruti Suzuki: On-road prices of entry-level cars would come down by around 8 per cent, driving demand for the entry-level segment. Maruti, which has over 80 per cent share of the segment, would be the biggest beneficiary.

3) Amara Raja/Exide: The batteries segment would benefit from shift in trade from unorganized to organized segment.

4) Pidilite and Asian Paints: Tax rates will come down to around 18 per cent from current 25 per cent. They would also benefit from gradual reduction in competition from unorganized players due to reduction in pricing gap between organized and unorganized players.

5) Shoppers Stop: Under GST, it can set off input tax credit on rent, which is a positive. It will also benefit from reduced price gap versus unorganized players.

6) Century Ply: The plywood industry is currently dominated by unorganized players, who have 65-70 per cent market share. Post GST, Century Ply will gain from shift of trade from the unorganized to the organized segment.

7) TCI: By gradually eliminating unnecessary inter-state border checks, the GST will lead to seamless truck movement, bringing down transit time and resultant costs. The creation of hub-and-spoke modeled warehousing chains, GST will eventually increase tonnage of trucks, thus ensuring cost efficiencies.

8) Gati: GST will create a larger market for GATI’s supply chain management solutions business. GST is also likely to lead to proliferation of ecommerce in India, creating immense revenue opportunities for Gati’ ecommerce solutions.

9) Havells/ V-Guard/Symphony/ Crompton consumer: These companies will benefit as tax rates at consumer level will go down from 26-29 per cent to 18 per cent.

10) ACC/ JKLC/ Prism: Cement companies will benefit from the reduction of effective rates and supply chain costs.

Some stocks are likely to be under pressure, once the GST is implemented:

1) Ashok Leyland: Reduction in commercial vehicles demand on account of reduction of logistical bottlenecks will hit the company in the medium term.

2) ITC: Tobacco is likely to be taxed at a rate of around 40 per cent under GST. An additional central excise duty is likely to be levied on the sector. Higher taxes will force ITC to increase prices, which will hit demand.

3) Titan: The recommended of a GST rate of 2-6 per cent for precious metals may increase prices of branded jewellery.