GST: Quick gainer and loser stocks to play today

Analysts expect the overall transition into the formal sector to take place at a slower pace due to tax neutrality and high compliance costs, it would be faster in categories where the GST rates are lower than the existing rates.

Here are some of the stocks, according to analysts, that are going to be impacted with the coming of the new tax regime.

Positives

PIDILITE INDUSTRIES
GST at 18% for adhesives as against the existing tax of 23% will certainly benefit the company most in terms of margins expansions as adhesives account for over 65% of its total revenue.

ITC
ITC will benefit significantly from GST as tax rate on cigarettes is lower than street expectations and GST will create efficiencies in the supply chain for cigarettes and ITC's `FMCG others' businesses.

COLGATE
Lower tax rate on toothpaste (GST at 18%) augurs well for Colgate as its current indirect tax rates are over 600 bps higher than the GST rate.

ULTRATECH CEMENT
Road transportation accounts for over 60% of total freight mix. Benefits pertaining to improvement in lead time and reduction in distribution and inventory carry cost will improve its operating performance in the coming quarters.

JSW ENERGY
Tax on coal under GST regime would be at 5% against the prevailing rate of 12%, which analyst believe will benefit to merchant players like JSW Energy. Merchant power sales account for over 60% of its total sales volume. A duty reduction of 7% will aid JSW to reduce its overall generation cost by 3%.

HERITAGE FOODS
As milk is exempted from GST, Heritage Foods will be benefit most considering it derives over 95% of revenue from milk and milk products.

DISH TV
There will be a positive impact on the company as the current tax outgo (service tax+entertainment tax) is 21-22% which would be reduced to 18%.Entertainment tax and CVD will get subsumed into GST.

CENTURY PLYBOARD
The newly-announced GST rates for decorative laminates are much lower than the current incidence, which is positive for laminate players.The new GST rate for laminates is 18% compared to the current rate of 27-29 per cent.



Negatives

VOLTAS
Based on the current GST rates (28 per cent for room ACs), prices are likely to see an upward revision of 2-5 per cent. Hence, volumes in 1H18 are likely to see downward pressure due to a) destocking by dealers followed by a lean sales period, which may restrict restocking and b) high growth base of 1H17, where UCP segment sales grew by 23 per cent YoY.

CHAMBAL FERTILISERS
GST is expected to negatively impact the fertiliser sector given higher tax rates, non-inclusion of subsidy, and disparity between input and output product tax rates in some instances.

INDIAN HOTELS
Luxury hotel were subject to multiple tax rate like luxury tax (varies across states), VAT and service tax. Under the new regime, all these taxes will be subsumed into one tax (GST). The single tax rate will result in lower admin cost. However, the new GST rate recommended for luxury hotels (28 per cent) is significantly higher than the prevailing rate (21-24 per cent), which will negatively impact margins of hotel companies.

VIP INDUSTRIES
Since the proposed GST rate is higher than the existing tax rate (18-19 per cent), analysts believe it may dent profitability of players like VIP Industries in the short-term. However, over the longer term, organised players may take a gradual price hike to partially negate the impact on margins.