Companies that will gain the most from GST rollout

The shares of companies that face stiff competition from the unorganised sector made smart gains after the Union Cabinet cleared the constitutional amendment bill on Wednesday for implementation of goods and services tax (GST). GST is a new tax structure that will make indirect tax uniform across India and replace the existing state and central indirect taxes.

Under the GST, a company having a turnover of more than Rs 10 lakh will have to pay the tax against Rs 1.5 crore under the current excise duty structure.

This will bring more companies from the unorganised sector under the new tax regime. As a result, cost and taxes for the unorganised players will increase.

Subsequently, it will reduce their competitiveness compared with the organised players. The key beneficiaries of GST will be sectors such as batteries, footwear, plywood, electrical appliance, ceramics, adhesives and paints, where the unorganised sector accounts for 35% to 70% of total market size. For instance, the replacement battery segment in India has a total turnover of about Rs 4,800 crore — nearly 50% of this is contributed by companies in the unorganised sector. Over the last few years, the proportion of unorganised battery players has reduced, and the implementation of GST will lead to more business for organised players such as Exide Industries and Amara Raja.