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GST rates: Consumer sector the biggest winner in the rates announced so far

Aditya Narain/Mumbai 19 May 17 | 10:05 AM

It’s the last lap of the Goods and Services Tax (GST) rollout now. Among the main imports of the GST Council’s decisions are: A July 1 GST rollout is almost certain; tax rates announced so far are largely in line with expectations (according to media reports), with some positive surprises in edible oil, capital goods and coal, though more clarity and details are awaited; and a few key rates are still to be disclosed.

While we believe some of the near-term tax gains are at least partly factored in, the bigger gains are more structural in nature, and lie ahead.

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The consumer sector is the big winner in the rates announced so far (as expected), but it’s the economy and markets that have the biggest gains ahead.

FMCG clear winner

The GST Council has approved 7 sets of GST rules, while the remaining 2 set of rules related to transition and returns are being vetted by a legal committee. The GST rates for select products have been disclosed, wherein lower tax rates on FMCG products was on expected lines, but lower tax rates on coal and capital goods was a big surprise.

Structural benefits in the offing

We believe that GST is a structural reform and is expected to accelerate the pace of GDP growth in India, despite implementation challenges in near term. As highlighted in our earlier reports, the GST regime will usher in lower taxes, seamless input tax credit, logistics savings and market share swings from unorganised to organised players.The author is the head of research for institutional equties at Edelweiss Securities

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