GST To Benefit Logistics, Auto, Auto Ancilliary, Cement And Consumer Goods Sectors

The GST Bill is set to be tabled in the  Rajya Sabha tomorrow. Industry expert Abnish Kumar Sudhanshu, Director & Research Head, Amrapali Aadya Trading & Investments Pvt Ltd. is expects the below mentioned sectors to benefit most from GST.
Logistics: We believe direct beneficiary of the GST bill would be logistic industry, including warehouse facilitators. It will reduce the transit time, thus bringing more efficiency into the system and benefiting transporters as well as manufacturers. Additionally, GST will trim down inter-state trade barriers, thus enhancing the growth in inter-state commerce.

Autos: For the auto companies, most goods manufactured in the country have an average 27-30% indirect tax component. If the proposed GST falls near 18-20%, then the final prices of goods may come down to 9-10%. Moreover, with GST all the taxes will be subsumed and a standard rate would be applicable across the country. Hence, we anticipate for the auto companies, the ultimately cost of manufactured products will be less compare to earlier.

Auto Ancilliary: Auto component manufacturing companies usually setup their units close to OEM facilities just to avoid VAT credit chain. The implementation would open new prospects for the consolidation of all these units into larger units which will be beneficial for the overall economic efficiency of the auto industry. Passage of GST is likely to be a boon for the ancillary space as it will have more incentives in terms of lower interest rates for accessing finance and removal of customs duties on import of select raw materials. Additionally, it will benefit them from unorganised players along with cost optimization in terms of movement and warehousing of goods due to uniform tax rate.

Consumer Goods: We suppose, consumer staples is another major beneficiary of GST implication, potentially saving 30 per cent of logistics costs from current levels of 7-8 per cent of sales. Currently, due to inter-state barriers and various state taxes, consumer companies commonly establish warehousing/stocking facilities in each state leading to higher logistics costs. The companies in the sector are approximately paying current tax of 22-27%. If GST rate falls between 18-19% (expected standard rate), it will lower the prices, hence reducing the price differential with unorganized players.

Cement: Most of the cement manufacturers are located near to the limestone quarries whereas the utilisation is throughout India and therefore the transport cost is high. Currently, cement companies are paying effective tax at the rate of 24.5 per cent including VAT and excise. Under the new regime, the rate would be around 18-19 per cent.

 

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