After opening the day on a positive note, the share markets in India trimmed its gains and are trading above the dotted line. Sectoral indices are trading mixed, with stocks in the FMCG sector leading the gains, while stocks in the PSU sector are trading in red.
The BSE Sensex is trading higher by 53 points (up 0.4%) while the NSE Nifty is trading higher by 7 points (up 0.4%). The BSE Mid Cap index is trading down by 0.8% and BSE Small Cap index is trading down by 0.4%. Gold prices, per 10 grams, are trading at Rs 28,691 levels. Silver price, per kilogram is trading at Rs 39,431 levels. Crude oil is trading at Rs 3,309 per barrel. The rupee is trading at 64.99 to the US$.
FMCG stocks are trading on a positive note with Marico and Lakshmi Overseas Ind leading the gains. ITC share price gained as much as 5% today after the Goods and Services Tax (GST) Council has announced the tax rates for the various items.
The GST tax rate on cigarettes has been fixed at 28%, while a 5% cess and duty per stick will also be levied, bringing total tax incidence to the current range of 60%. Thus, the overall tax impact is going to be neutral, the reports noted.
One must note that, ITC gets 35% revenue from the other FMCG categories including that of agribusiness, wherein the GST rates for most of the categories are 18% or less. ITC had witnessed months of pain on the back of an uncertainty in the GST tax rates on cigarettes. However, with the tax slabs fixed in the range of 5-28%, coupled with a cess cap of 15%, taxation on cigarettes are set to be lower.
Reportedly, with the government focus on keeping tax on items of mass consumption low, this sector could be the clear winner. While milk, grain and cereals are exempt from GST; other products like sugar, tea, coffee and edible oil will attract just 5% GST.
We believe that GST is one of the key reforms that has the potential to bring about a structural change in the Indian economy.
