Investors Guide! These 7 stocks, 5 sectors likely to get affected the most from GST revisions - Check the list

The 45th GST Council Meeting headed by Union Finance Minister Nirmala Sitharaman concluded last week. The meeting saw crucial decisions being made, including extension of concessional tax rates on COVID-19 medicines, tax cut on cancer drugs and waiver of GST on import of highly expensive medicines for muscular atrophy.

It decided that it will continue to keep petrol and diesel out of the uniform national tax regime. The GST changes that have been proposed has been done to revisit the rates for certain industries such as metals, ores and concentrates where the revision has been done upward.

Experts are of the view that the GST revisions will benefit market leaders in respective sectors that are likely to benefit the most.

“It is important to realize that while there would be a short-term negative impact on the market, the branded players will be able to absorb this into the price over time,” Naveen Chandramohan, Founder & Fund Manager – ITUS Capital, said.

“If one can take a slightly more nuanced stance towards the GST revisions, it is increasingly clear that the market leaders will benefit to gain the share of the market vs the unorganized players,” he said.

Also Read: 45th GST Council Meeting Outcome: Top decisions you should know - Check highlights
 

We have collated a list of 7 stocks & 5 sectors from different experts that could get impacted the most from the GST revision:

Expert: Rahul Sharma, Co-Founder, Equity99.

Zydus Cadila Healthcare:

The company`s 1Cr COVID-19 doses will hit the market next month and now with the extension of the concessional rate we expect this counter to reach the price of 750 with SL of 500.
 
Hindustan Copper:

Recently the government announced OFS of Rs 700Cr in this counter at the floor price of 116 after which stock corrected 5% intra-day. Now, with the GST rate hike on copper, we expect this counter to reach the price of Rs 100.

Zomato Ltd:

With the introduction of GST on aggregators & resignation of co-founder Gaurav Gupta, the stock looks dicey on the charts.  We expect a Target price of 110 on this stock.

Expert: Ajit Mishra, VP- Research, Religare Broking Ltd.

Cipla, Dr. Reddy Laboratories, ITC & Jubilant FoodWorks

The GST exemption for COVID-related drugs is positive for companies like Cipla and Dr. Reddy.
No raise in rate for Tobacco products came in as a huge positive for ITC. Moreover, the announcement of GST to be paid by e-commerce operators is negative for food delivery players and was negative for Zomato and Jubilant Foodworks.  

Sectors To Benefit –

Expert: Naveen Chandramohan, Founder & Fund Manager – ITUS Capital

Restaurants:

From January 1, food delivery apps will have to collect and deposit 5 per cent GST with the government, in place of restaurants, for deliveries made by them. There would be no extra tax burden on the end consumer. The impact on the restaurants is not going to be significant as the announcements made will impact the collection mechanism, which will put the onus on the aggregators to build the infrastructure to collect and pay the 5% GST number. This creates additional down-streaming on the systems to execute this. This aspect of the announcement could have been thought through better by implementing a higher Tax collected at Source vs putting the onus on the aggregators.

Paint:

At a broad level, the implementation of GST creates a scope for market share all the way downstream to flow through into the organized sector. We will continue to see numbers paint a similar structure over time. Today, 95% of the Paints industry is controlled by the branded players and this is likely to be a phenomenon we see across multiple sectors – where growth will flow into. This will naturally see cash flow growth focussed companies see the benefit over time.

Expert: Vinod Nair, Head of Research, Geojit Financial Services

Metals

GST on ores and concentrates of metals such as iron, copper, aluminum, and zinc has been increased from 5% to 18%, which will have an impact on domestic metal stocks, in the near term. Since the steel companies would avail input tax credit for iron ore, we don’t see a long-term impact on the sector on account of GST rates, rise in prices, and strong demand. Stocks to impact in the near term- Tata Steel, Hindalco, JSW Steel

Consumer

Do not expect any impact due to GST introduction of 5% on services by food delivery platforms as it is only a transfer of responsivity from the restaurants to improve efficiency in tax collection. Expect some impact on the footwear sector due to the increase of GST rate to 12% from the current 5% to correct the inverted duty structure (for footwear costs less than Rs1,000).

Pharma

The GST council has decided to extend the existing concessional GST rates on Covid-19 drugs till Dec 31, 2021. In addition to that, the GST rates of 7 more drugs have been slashed from 12% to 5% till the end of the calendar year. Further, while imported for personal use, life-saving drugs namely Zolgensma (which is also considered the world’s most expensive drug) and Viltepso have also been exempted from GST. The GST rate on Keytruda drug has also been cut to 5%.

From the pharma sector perspective, this extension of concessional rates is likely to lead to a reduction in the MRP on the drugs for which the GST rates have been revised downwards. This in turn will be beneficial to the public as it will reduce the financial burden for treating covid. Moreover, since it is an extension of the existing rates, it is not likely to have any major impact on the sector.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)