These auto stocks to be catalysed by GST
DSIJ Intelligence / 04 Aug 2016
Automobile sector is expected to be a major gainer once the GST is implemented. Already the sector is doing well and attracting lot of investor attention.
Automobile sector is expected to be a major gainer once the GST is implemented. Already the sector is doing well and attracting lot of investor attention.
The major benefit to the sector will be the lower GST rate at 18 per cent or 20 per cent. According to Pawan Goenka, executive director (Mahindra & Mahindra), the GST rate should be 18 or 20 per cent across the products and there should not be any exceptions.
The Auto industry will definitely cheer the uniform tax system as the current effective tax rate for the industry is in the range of 30 per cent to 47 per cent.
The industry stands to gain even if the GST rate stands out to be in the range of 20 to 25 per cent. Several studies suggest that the lower GST rate will help reduce cost for the end user by about 10 per cent and this will help revive the demand for automobiles.
With logistics' costs expected to go down due to GST , the Automobile sector stands to gain substantially.
Mahindra & Mahindra and Hero MotoCorp are the two stocks that can benefit from the historic tax reform.
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