ITC shares up 6.5% as govt keeps GST rates on tobacco products unchanged

Live mint By Ravindra Sonavane Fri, Nov 04 2016. 01 26 PM IST

Consumer durable companies were also trading higher as the sector is expected to benefit from the new tax rates under GST.

The FMCG firms are likely to be positively impacted with the implementation of GST. Photo: Bloomberg

Mumbai: Shares of cigarette companies jumped on Friday with the government keeping tax rates on tobacco products unchanged under the new goods and services tax (GST) structure.

ITC Ltd jumped 6.51%, the maximum gain since 23 May, and touched a high of Rs.256. So far this year, it has gained 15.11%.

Other stocks like Godfrey Philips India Ltd rose 2% and VST Industries Ltd rose 2.6%.

Consumer durable companies were also trading higher. Hindustan Unilever Ltd rose 2.4%, Colgate Palmolive India Ltd 4.7% and Dabur India Ltd was up 2%.

“A major step towards implementing the biggest reform of indirect taxes, the government has finalized four tax rate slabs ranging from 5% to 28%. The FMCG firms are likely to be positively impacted with the implantation of GST. FMCG companies currently pay nearly 28-38% tax including excise duty, VAT and entry tax, so the GST at 12-20% could lead to improve the margins of companies” said Satish Kumar, a research analyst with Choice Broking.

On so-called demerit and sin goods such as aerated drinks, luxury cars, tobacco and pan masala, a cess will be levied by the Centre over and above the 28% slab. The cess will be levied in such a manner that the final tax incidence on such demerit items is not less than the existing tax rates, Mint reported.

“The exact impact on each category will be known only when the harmonization takes place, our initial understanding is that certain categories of consumer products (paints, plywood, tiles) will stand to benefit. Many FMCG product categories like soaps, toothpaste, hair oils, etc will also stand to benefit as they would now be taxed between 12-18% while the existing tax rate is in excess of 25%,” Antique broking firm said in a note to its investors.

India moved a step closer towards implementing the GST after the Centre and the states struck a consensus on the rates and structure of the ambitious tax reform. However, the second and final day of the fourth GST council meeting on Friday is likely to be contentious, with both sides set to debate the sharing of administrative powers under the new tax regime.

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