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MOSL: GST-Another step to make GST more palatable; Rates reduced for more categories of goods and services

GST: Another step to make GST more palatable; Rates reduced for more categories of goods and services

The GST Council – in its 25th meeting held on 18th January 2018 – decided to prune tax rates on 29 categories of goods and 53 categories of services. The Council also laid emphasis on easing compliance burden for assessees. According to the Council, GST collections have remained low due its dependence on unilateral declarations by assessees. However, it sees the situation improving with the roll out of anti-evasion measures, such as E-way Bill for interstate-trade from 1st February 2018. Noting weak revenues (INR3.1b) from ~1.7m dealers registered under the composition scheme, the Council is now likely to amend the GST laws to apply a reverse charge mechanism under this scheme. Overall, we believe that companies like Wonderla and Adlabs Entertainment would particularly benefit from the changes in the GST rates. Jain Irrigation, Maruti, L&T, P&G, Titan, PC Jewelers, IOC, BPCL, HPCL, ONGC, Oil India, RIL and Vedanta (holding co of Cairn India) could see marginally positive impact.

 More categories of goods/services brought under lower tax bracket

• The GST Council, in its meeting held on 18th January 2019, reduced tax rates on 29 categories of goods and 53 categories of services – in line with what we had cited in our previous GST note. The revised rates will be applicable from 25th January 2018.
• We believe the move will particularly be beneficial for companies engaged in the business of theme parks (Wonderla/ Adlabs Entertainment), drip irrigation systems (Jain Irrigation), jewellery (Titan, PC Jewelers), as well as OMCs (IOC, BPCL, HPCL), E&P companies (ONGC, Oil India, RIL, Vedanta [Cairn India]), auto manufacturers (Maruti), sugar boiled confectionery players (P&G) and metro/monorail asset owners (L&T).
• Duty on cigarette filter rods is hiked to 18% (from 12%). However, since the GST rate on cigarette is already higher than the revised duty on filer rods, the impact will be nil for cigarette manufacturers (ITC, Godfrey Phillips), as the increase in filer rods duty will be adjusted as input credit.