Top 5 things you should know about GST if you are an investor in Indian market -20 May, 2017

Equity markets mirror the economic fundamentals and if GST is likely to add to that strength, investors have nothing to worry about.

The goods & services tax (GST) has moved closer to becoming a reality by July 1, 2017. The GST Council earlier this week fixed tax rates on 1,211 items and released the final list of GST rates for 98 categories of goods.

Although the market has already priced in all the good news about GST, but successful implementation is likely to boost the confidence of investors and improve earnings growth of companies has remained flat or in single digits for the past 4-8 quarters.

Equity markets mirror the economic fundamentals and if GST is likely to add to that strength, investors have nothing to worry about.

We have collated a list of five factors which investors should know about GST and how it will impact markets:

GDP growth is always seen as the strength of any economy. India is growing at a pace of 7 percent and some experts feel that implementation of GDP could well add another 2 percent to its growth rate over a period of time.

“GST will be a big game-changer in sectors such as logistics because most companies will save 1 percent at least on logistics cost of the total cost. It will be very difficult for any company to evade GST,” Rakesh Jhunjhunwala, Partner at Rare Enterprises said in an interview with CNBC-TV18.

“Compliance will bring tax efficiency and raise tax revenues. And, lastly, it will make the economy more and more digital because every return is going to be digital. I think it could raise gross domestic product (GDP) by 2-2.5 percent over a period of time,” he said

Around 80 percent of the goods will attract 18 percent or less GST against 35 percent of currently taxed at 27 percent or higher. Effectively, the ushering in of GST will help reduce the prices for the end user.

“The articles of daily usage including milk, food grains have been exempt from taxation under GST regime making it easier on the pocket of a common man,” Arun Thukral, MD & CEO, Axis Securities told Moneycontrol.

“The markets have more than welcomed the new rates under GST regime. GST is a structural reform and is expected to accelerate the pace of GDP growth of India post implementation,” he said.

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