Effect of GST Tax Rate Cut on Automobile Sector Stocks
By Anushi Surana |
Gst Tax Rate Cut impact on automobile sector | Day Trading | 1 comment | 19-September-2019 |
GST Council is expected to relief GST rates in automobile sector from 28% to 18% to boost up the revenue and consumption in automobile Sector which is continuously facing slowdown due to less spending and down fall of economy.
CHALLENGES IN GST REDUCTION
States are expected to revenue loss due to cut down in tax rates. Reduction may be tough for government because cut in GST rates will affect the state revenue which can cut down monthly collections from Rs.15000cr to Rs.10000-11000cr but it is expected to compensate from 1% to 22% cess. Experts Says Government will not issue a proposal without assessing the situation of compensation cess fund. Compensation Cess fund was collected 1.9 trillion during 2017-2019 out of which 1.7 trillion has been released in July as a state compensation and the balance is left is Rs.23391 crore.
IMPACT ON AUTOMOBILE AND RELATED SECTORS:
Automobile Sector Companies Revenue status:
Maruti Suzuki India Ltd revenue of first quarter is declined 12% to Rs.19,720 crore but still higher than the expected estimated revenue Rs.19070. Hyundai sales dropped only 3.8% in July 2019 in comparison to previous year July month. Still in the dwindling market Hyundai market share has increased 3% with maintaining the consistent position on 19.4% market share in July 2019. Tata Motors Revenue dips 8% at a loss of Rs.3,680 crore in Q1. Mahindra and Mahindra net sales dipped by 7.8% in Q2.
Impact on Related Sectors:
Revenue of Oil, Auto-ancillaries and metal is highly affected in the slump market. Original Equipment manufacturers (OEM) facing a major crises with drop down in work orders by 25-30%. Small industries dependent on OEM is facing issues because of companies’ halt in further productions and shutting the units in some of the regions.
IMPACT ON AUTOMOBILE SECTOR STOCK PRICES:
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COMPANIES
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STOCK PRICES ON 18-09-2019
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Maruti Suzuki India
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6107
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Tata Motors
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122.55
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Mahindra and Mahindra
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525.35
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Eicher Motors
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16129
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Though India is facing economy slowdown but hike is expected in above stock prices after the GST council approval for reduction in tax rates from 28% to 18% in the GST council meeting which is about to held on 20th September. Considering the major slowdown in the automobile sector GST council has decided to relief tax rates to improve revenue condition of the automobile sector companies and their related sector companies. For more Financial Education Connect with India’s Most Trusted Online Financial Education Platform –https://www.researchinn.com/