INDUSTRY INTERNSHIP REPORT

on
“A STUDY ON GST AND ITS IMPACT ON STOCK MARKET”

(Report submitted in partial fulfillment of the requirement for the award of

Post-Graduation Diploma in Management)

1
2
 CONTENTS

• Chapter-1 Introduction 04-13

• Chapter-2 Review of Literature 14-15

• Chapter-3 Methodology 16-24

• Chapter-4 Data Analysis 25-35

• Chapter-5 Findings and Conclusions 36-37

• References 38

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 CHAPTER - 2
REVIEW OF LITERATURE

Reference-1
“A Review on Goods and services tax (GST): A panacea for Indian economy & its impact on
various sectors” by Karteek Madapana, Kotini Avinash Gupta (October 2016)

GST stands for “Goods and Services Tax”, and is proposed to be a comprehensive indirect
tax levy on manufacture, sale and consumption of goods as well as services at the national level.
It will replace all indirect taxes levied on goods and services by the Central Government and State
Governments. GST is the only indirect tax that directly affects all the sections of our economy.
India has been trying to implement the Goods and Services Tax (GST)for last few years but due
to political and state governments autonomy issues the Federal government has been unable to
make it law. Several countries has implemented this tax system followed by France, the first
country introduced the GST in 1954. In India the proposed GST would be implemented from 1
April 2016. For this the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014
was Introduced in the Lok Sabha. The Bill was passed by the Lok Sabha on 6 May 2015. Now Bill
has to get the approval of Rajya Sabha and President. India is a federal democratic and therefore
the GST will be implemented parallel by the Central and State governments as CGST and SGST
respectively. The present paper focused on explaining the concepts of GST and its evolution in
India. Then it discussed the salient features of proposed GST and how does it works. It highlights
the benefits of the GST for Indian economy. This paper also shows the challenges to implement
GST and how it can be overcome.

Reference-2

“A Review of Goods and Services Tax (GST): Impact on Indian Stock exchanges and various
stock Sectors” by Mr Priyanshu Sharma, Dr Manoj Sain (November 2017)

Till such time as GST fears subside, it is good to look at stocks outside the Sensex. For
those with strong nerves, it would make sense to play the contrarian game, ahead of the RBI’s
credit policy change in August. Analysts believe the short-term impact of GST could be neutral to
negative and positive, though this huge tax overhaul is expected to give further direction to the
economy and markets. There are expectations that GST will boost India’s GDP growth by 150-
200 basis points in the coming years. However, the rollout may impact first quarter earnings of
India Inc, as companies will take some time to align their production processes with the new
framework, adjust to the input tax credit system and get a handle on their working capital

4
requirements. Input credit allows a seller to reduce the tax burden being paid by claiming offset
for the taxes already paid on inputs.

Reference-3

“Effect Of GST Rate Announcement On Sectorial Indices Of National Stock Exchange” by

Lakshmi B., Rebecca J. Alex (January, 2018)

The present article aims to study the reaction of Indian Capital Market with respect to the
announcement of GST rates and also tries to test semi-strong efficiency of the stock market. The
performance of stock market and its behavior serves as an indicator of the reactions of the economy
of the nation. The Goods and Services Tax is a major tax reform in India which is most likely to
boost the economic growth of the country. This expectation of the investors is assumed to be
transformed to stock price returns that are either negative or positive. Therefore the present study
observes the reaction of stock market to the announcement of much awaited GST rates on May
8th 2017. The study is conducted using the daily closing prices of various NSE sectorial and
thematic indices. OLS, GARCH and TGARCH and event study is used for the study. The findings
of the study are useful to the portfolio managers, investors, and regulatory bodies.

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 CHAPTER – 3
METHODOLOGY

• India as world’s one of the biggest democratic country follows the federal tax system for
levy and collection of various taxes.
• Different types of indirect taxes were levied and collected at different point in the supply
chain.
• The Value Added Tax (VAT) when introduced was considered to be a Major improvement
over the pre-existing central and state excise duty.
• Now the Goods and Services Tax (GST) will be further significant breakthrough towards a
comprehensive indirect tax reform in the country.
• GST is levied at every step in the production process, but is meant to be refunded to all
parties in the various stages of production other than the final consumer.
• The tax came into effect from July 1, 2017 through the implementation of One Hundred and
First Amendment of the Constitution of India
• The Goods and Services Tax is a major tax reform in India which is most likely to boost the
economic growth of the country. This expectation of the investors is assumed to be
transformed to stock price returns that are either negative or positive.

Objectives of the study

I. To cognize the concept of GST

II. To study the features of GST in India
III. To study its impact on stock market of various sector in India.

METHODOLOGY

Data Collection and Source of Data

Being an explanatory research it is based on secondary data of journals, articles, newspapers and
magazines and published works and reports. Considering the objectives of study descriptive type
research design is adopted to have more accuracy and rigorous analysis of research study. The
accessible secondary data is intensively used for research study.
The information gathered involves day to day closing share prices of Nifty 50 and 10 Sectorial
Indices of National Stock Exchange (NSE). The information is collected from the site of NSE. The
information is gathered for a period ranging from 1st January 2017 to 30th December 2017.

6
Sources of Data

• https://www.nseindia.com
• www.bseindia.com
• http://www.gstindia.com
• http://www.gstseva.com

Introduction of GST :
GST is one of the most crucial tax reforms in India which was long pending. It was supposed to
be implemented from April 2010, but due to political issues and conflicting interests of various
stakeholders it could not be implemented. It is a comprehensive tax system that will subsume all
indirect taxes of states and central governments and unified economy into a seamless national
market. It is expected to iron out wrinkles of India's indirect tax system and play a vital role in
growth of India.
Before GST :

GST is one indirect tax for the whole nation, which will make India one unified common market.
GST is a single tax on the supply of goods and services, right from the manufacturer to the
consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of
value addition, which makes GST essentially a tax only on value addition at each stage. The final
consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off
benefits at all the previous stages. GST is one indirect tax for the whole nation, which will make
India one unified common market. Adopted by over 150 countries in the world, GST has proved
to benefit both corporates and economies. Policymakers have consistently resonated the benefit of
a unified taxation system in a federal country like India.

Administration of GST :
GST is of two types: (a) Single GST and (b) Dual GST. Many countries have unified GST.
However, in countries like Brazil and Canada there is dual system wherein GST is levied both by
the Central Government and the State Governments. Keeping in mind the federal structure of India,

7
there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre
and States will simultaneously levy GST across the collect Central Goods and Services Tax
(CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all
transactions within a State. The input tax credit of CGST would be available for discharging the
CGST liability on the output at each stage. Similarly, the credit of SGST paid on inputs would be
allowed for paying the SGST on output. No cross utilization of credit would be permitted.

This will comprise of:

 Central GST (CGST) which is levied by the Centre.
 State GST (SGST) which is levied by the State.
 Integrated GST (IGST) which is levied by the Central Government on inter-state supply
of goods and services.

Benefits of GST :

The benefits of GST can be summarized as under:

1. For business and industry
 Easy compliance
 Uniformity of tax rates and structures
 Removal of cascading
 Improved competitiveness
 Gain to manufacturers and exporters

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 2. For central and state governments
 Simple and easy to administer
 Better controls on leakage
 Higher revenue efficiency
3. For the consumer
 Single and transparent tax proportionate to the value of goods and services
 Relief in overall tax burden
 Reduction in prices.

Source: www.tiagnet.com

Date: 11 Aug 2017

Before GST :
A manufacturer’s commercial invoice reflects both central excise duty and state VAT on the same
goods. This is because both are indirect taxes and are collected from the customer. Conceptually,
however, before GST the centre taxes ‘manufacture’, and thereafter the state taxes ‘sale’ of the
goods. The result is that the central excise duty is imposed first on the goods, and the state tax
comes after that, on a value that is price plus central excise duty. If the goods are priced at Rs 100,
and excise duty is 10% and VAT is 14%, the before GST scenario was that the invoice will read
as follows:
Goods Rs. 100.00
C. Excise duty @ 10% Rs. 10.00
Sub-total Rs. 110.00
VAT @ 14% Rs. 15.40

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After GST :
When the same transaction of ‘supply’ is being taxed by both central and states, the taxes are levied
simultaneously on the same value. The rate of GST in the above transaction will be 24%, split as
10% central GST and 14% state GST. The transaction will then be taxed as follows:
Goods Rs. 100.00
CGST @ 10% Rs. 10.00
SGST @ 14% Rs. 14.00

Effect on Stock Market:

GST is one of the largest tax assessment changes in India it boosts overall growth of the economy.
All the segments of economy large, medium, small scale units, will be effected by GST. Numerous
indirect taxes of state and central will be included in GST, as only paying single GST rather than
all can be done (Garg, ,2014). GST aims to create single market that benefits economy as a whole.
Many countries follow this tax system the first country to implement GST was France .GST helps
in improvement of Indian economy and it is especially useful in enhancing the GDP of the nation
in excess of two percent (Chaurasia, Shweta, Kumar Sen,2016). GST brings a simpler and
transparent tax system which is user friendly and it is also effective for fiscal management because
of same tax rate whole nationwide (Sehrawat, Dhanda, 2015). All segments of economy whether
the business, business including Govt. divisions and administration area might need to manage
effect of GST. GST makes Indian market economically stronger and many economists say that
GST will is probably going to enhance tax collections and Boost India’s financial advancement by
removing tax barriers amongst states and coordinating India by a uniform tax rate. The main
contribution to economy because of GST would be to end the cascading effect of taxes (Garg,
2014). GST divides tax burden equally between services and manufacturing by increasing the tax
base and limiting exemptions. Different studies have been attempted on stock market responses to
news impact, for example, political news, central elections, monetary policies, mergers and
acquisitions and have tried to test the short term efficiency of the Indian stock exchange A semi
strong market is a market in which all the public information is calculated into the stock prices
without giving any chance to investors for making abnormal returns (Fama, 1991).

The implementation of GST is expected to reduce the cost of logistics. This includes costs of
transportation as Octroi tax will not be levied separately.

The implementation of the GST is expected to simplify the tax structure and make the supply chain
more efficient. This would narrow the cost differentials between organized and unorganized sector.
The organized sector would be in a better position to compete with the unorganized sector on
prices.

10
“It may not lead to an immediate impact on markets, there cannot be an argument about the fact
that GST is a big and much-needed structural reform. If passed, this will be a step in the right
direction" quoted by Pankaj Sharma, Head of Equities, Equirus Securities.

This could shift demand to companies in the organised sector from unorganised players.

Hence companies like Finolex Cables, Havells etc that compete with the unorganized sector in
products like cables, wires could stand to gain.

Some direct benefits are as follows:

 It will act as a boon for the company and business which often deals with multi-level tax
levitation.
 It will boost the company related to logistics which mainly deals with export and import
due to ease in the process of faster delivery. Also, ease of paperwork.
 It is going to make our tax administration a lot more efficient because you are ultimately
collapsing manufacturing taxes through excise duty and service taxes as well as states
VATs into a single tax, which obviously brings a lot of efficiencies that can add between
100 bps and 200 bps to GDP in the long run.
 The sectors to benefit the most would be logistics, E-commerce, automobile, and FMCG
among others.

Why government wants to pass GST bill?

Implementing GST bill will hike the taxes on service sectors and this will increase the tax revenue
of government. Service sector is increasing in India at a high increasing rate. As per the survey, in
India, the growth of services-sector GDP has been higher than that of overall GDP between the
period FY2001- FY2014. Service sector tax increases ad this sector is also increasing. Tax revenue.
It will also curb corruption and black money. It will restore the huge purchasing power in the hands
of the consumer, thus self-propelling the economy into a spending and investing cycle. It will
attract huge domestic and foreign funds will flood the Indian market so high cash reserve in
government treasury.

It will also improve the tax-to-GDP ratio by around 1.5 per cent. Whatever the benefits exist but
still there are many challenges in India to pass the bill. It has been in talk since a long time and is
likely to get passed in this monsoon session of parliament. Also, there are many benefits that
central government is working to make India a better place like curbing black money, corruption
etc.

11
How GST will impact inflation and stock markets

The Goods and Services Tax (GST) which is expected to be implemented from April 2017, is
generally regarded as a game changing reform. GST can make the indirect tax system very efficient
and will benefit all stakeholders including manufacturers, sellers, the ultimate consumers and the
tax collecting governments apart from giving a substantial boost to GDP growth. GST is a value
added tax where tax is imposed only on the value added at each stage in the supply chain. It is
levied at all points in the supply chain. Credit is paid for acquiring inputs used in making the
supply. In India GST is defined as ‘tax on supply of goods or services other than alcohol for human
consumption.’ In simple language, GST is a single tax on all goods and services in the entire
economy.

The GST Council which will decide the rates is yet to finalise the rates: Three rates are likely: a
concessional rate (likely to be 12 per cent), a standard rate (rumoured to be 18 per cent), and a
luxury rate (likely to be 40 per cent). The standard rate will be applicable to around 70 per cent of
goods and services. Alcohol for human consumption and petroleum products are presently
proposed to be exempted from GST.

How GST Bill can impact Indian stock Markets?

The Good and Services tax in the biggest indirect tax reform since 1947 and it has potential to lead
the economic integration of India. This will be levied on manufacture sale and consumption of
goods and services. In the words of the Finance Minister Arun Jaitley, the GST bill will lead to the
economic integration of India. The main function of the GST is to transform India into a uniform
market by breaking the current fiscal barrier between states. Thus the GST will facilitate a uniform
tax levied on goods and services across the country.

Currently, the indirect tax system in India is complicated with overlapping taxes levied by the
Centre and the State separately. Framework of the GST will replace indirect taxes. The GST will
have a ‘dual’ structure, which means it will have two components- the Central GST and the State
GST. They will both have separate powers to legislate and administer their respective taxes. Thus
equally empowering both. Taxes such as excise duty, service, central sales tax, VAT ( value added
tax), entry tax or octroi will all be subsumed by the GST under a single umbrella. With passing of
the GST bill, we can expect a climate of improved tax compliance.

Thus, the GST will basically have only three kinds of taxes, Central, State and another called the
integrated GST to tackle inter-state transactions. The goods & services tax (GST) is advertised to
be a game changer for the economy. But the impact of these tax reforms, whenever they come,
will not be immediate.

12
Yet, it will be a big sentiment booster for the markets because the impact will be great in coming
years and it is directly going to enhance Indian GDP. Enhancing GDP will attract more foreign
investments and which in turn would take India to greater heights and obviously stock markets
will make new highs. Major impacts on Indian markets and economy

1) The GST bill, if implemented, will boost the ease of doing business in the country, because this
single tax (GST) would come as a boon for those industries or businesses that often deal with
multiple levies within the country

2) GST will boost earnings of companies in logistics, manufacturing and transportation sectors
during second half of 2016 if GST is implemented from April 1, 2016.

3) It is going to make our tax administration a lot more efficient, because you are ultimately
collapsing manufacturing taxes through excise duty and service taxes as well as states VATs into
a single tax, which obviously brings a lot of efficiency that can add between 100 bps and 200 bps
to GDP in the long run. Any positive news around GST will be favourable for markets at a time
when concerns over the US Federal Reserve rate hike and China jitters have capped most of the
upside in the domestic equity market.

Major blockage for passage for GST Bill

The government plans to roll out GST from April 1, 2016, and it can potentially boost India’s GDP
by 100-200 bps, said experts. For that the government needs Parliament approval to the pending
bill during the ongoing winter session. The main opposition, Congress, has stalled the passage of
the bill in the Rajya Sabha.

If the government fails to pass the GST bill in the winter session of Parliament, it will miss the
April 1 deadline, which might not go down well with markets and foreign investors.When is the
proposed GST set to start functioning and what are the hurdles? The GST regime is intended to be
functional from 1st April, 2016. The first mention of the bill was in 2009 when the previous UPA
government opened a discussion on it. They were successful in introducing the bill but failed to
get it passed. On 17th December 2014, the NDA government made slight changes to it and
redefined it in the Lok Sabha. The bill got cleared on May 6th this year. However the current
challenge facing the bill is that it needs two-third majority of both houses and 50 percent of the
state assemblies will have to ratify it. The bill is now stuck in the Rajya Sabha, because the current
government does not hold a majority here. The role of the opposition party, The Congress demands
for reforms in key areas of the GST has been stalling the process of passing the bill.

13
Three main concerns of the Congress over the bill were:

– One per cent additional tax as goods move across states

– The constitutional cap of 18 per cent and an independent dispute redressal mechanism.

– The party had maintained that the government was ignoring the concerns raised by the party on
the legislation.

Impact on inflation

The impact on the consumer will depend on the standard rate. If the standard rate is 18 per cent,
there won’t be any inflationary impact since the higher service tax rates (presently 14.5 per cent)
will be compensated by the lower rates on consumer staples, durables, vehicles etc which are
attracting 24 per cent and above presently. The prices of hand sets, FMCGs, automobiles, white
goods, and cement are likely to decline. The costs of all services like telecom, travel, insurance etc
will go up.

Impact on the market

The stock market has an uncanny ability to anticipate events and discount them. In the case of GST
also, this game of “buy on rumours and sell on news” played out. Logistics stocks, major
beneficiaries when GST rolls out, have corrected after the event. FMCG, consumer durables,
automobiles and cement will be major beneficiaries if the standard rate is around 18 per cent.
Therefore, further market reactions will happen when the standard rate is known. The market, in
general, will substantially benefit in the long run when GDP growth rate and earnings pick up.

What are some disadvantages?

Everything have 2 sides, same applies with GST. It will affect some sector in negative way.

 Some state may lose some tax benefits.

 Service sector may get affected as service tax will get hiked to 18% from current
14.5%.
 Execution of GST all over India will a cumbersome.

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 CHAPTER – 4

DATA ANALYSIS

Closing prices of various Indices before implementation of GST (Table-1)

Industry/Index Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17

NIFTY 50 8561.30 8879.60 9173.75 9304.05 9621.25 9520.90
FMCG 21832.65 22338.20 23542.30 23675.40 25841.80 26752.05
Auto 9837.75 9654.65 9880.20 10255.15 10870.80 10540.25
Bank 19515.15 20607.25 21444.15 22358.25 23424.80 23211.20
IT 9848.50 10680.95 10703.25 9943.70 10549.10 10155.05
Media 2771.40 2996.35 3174.25 3252.20 3066.05 2982.05
Metal 3072.10 3127.30 3096.55 2974.40 2952.95 2991.35
Pharma 10236.35 10585.15 10411.15 10120.90 9025.25 9606.40
Energy 10674.15 11360.20 11648.70 12263.55 11925.65 11600.40
MNC 10424.80 10611.00 10974.65 11239.30 11921.95 12090.55
Infra 2939.60 2997.85 3096.65 3255.20 3213.15 3201.35

Closing prices of various Indices after implementation of GST (Table-2)

Industry/Index Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17

NIFTY 50 10077.10 9917.90 9788.60 10335.30 10226.55 10530.70
FMCG 25744.35 25834.90 24480.80 25687.70 25820.05 26851.50
Auto 11002.65 10612.55 10811.25 11370.00 11292.90 12009.70
Bank 25103.65 24318.40 24053.00 25019.35 25332.40 25539.45
IT 10755.75 10558.25 10475.35 10837.90 11115.35 11665.75
Media 3100.35 2966.35 2983.60 3151.25 3318.80 3464.30
Metal 3259.95 3474.85 3550.30 3876.55 3678.35 3940.15
Pharma 9476.40 8859.65 9172.60 9756.00 9238.75 9620.10
Energy 12829.15 13150.05 12772.65 14511.20 14124.65 14249.30
MNC 12924.60 13139.70 13125.55 13762.45 13741.00 14801.90
Infra 3401.35 3323.80 3245.65 3581.85 3517.25 3637.50

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 SECTOR WISE IMPACT

I. FMCG

GST implementation certainly benefited supply chain efficiency for FMCG companies like
Nestle, Marico, Dabur, and Colgate. Currently, Colgate pays an effective tax of 25-26 per
cent and post-GST the tax rate will get lowered to 18 per cent on toothpaste (around 80m per
cent of sales), which is a big positive. Colgate might achieve market share by lowering prices,
as its competitors like Patanjali and Dabur are already paying lower taxes because of tax
benefits. Moreover, the anti-profiteering clause on GST means that the tax savings should
also be passed on to the consumer, thus stimulating demand.

Nifty and FMCG

30000.00

25000.00

20000.00

15000.00

10000.00

5000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 FMCG

 The FMCG sector could see significant savings in logistics and distribution costs as the GST
will eliminate the need for multiple sales depots. The GST rate for this sector is expected to
be around 17% which is way lesser than the 24-25% tax rate paid currently by FMCG
companies. This includes excise duty, VAT and entry tax – all of which will be subsumed
by GST.
 FMCG sector could notice a decline after establishment but then showed growth over a
period of time.

II. Automobiles

The automobile industry in India is a vast business producing a large number of cars
annually, fueled mostly by the huge population of the country. Under the current tax system,
there are several taxes applicable on this sector like excise, VAT, sales tax, road tax, motor
vehicle tax, registration duty which will be subsumed by GST. Though there is still some

16
 ambiguity due to tax rates and incentives/exemptions provided by different states to the
manufacturers/dealers for manufacturing car/bus/bike, the future of the industry looks rosy.

NIFTY and Auto

14000.00

12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 Auto

 Automobiles could somewhat be a mixed bag as the tax will vary across categories. Luxury
cars are going to attract 28 per cent GST plus tax of 15 per cent. Small petrol automobiles
will encounter 28 per cent plus 1 per cent tax, and small diesel cars 28 per cent GST plus 3
per cent tax.
 Automobile stocks for most segments remained unaffected after GST implementation. New
tax on diesel and petrol vehicles may effect mid-segment vehicles, which resulted in gains
for two-wheelers.

III. Bank

The introduction of GST in India is a substantial shift from the current tax regime. It is
expected that service sectors will have a major impact on GST than the manufacturing or
trading sector. Among the services provided by Banks and NBFCs, financial services such
as fund based, fee-based and insurance services will see major shifts from the current
scenario.
Owing to the nature and volume of operations provided by banks and NBFC vis a vis lease
transactions, hire purchase, related to actionable claims, fund, and non-fund based services
etc., GST compliance will be quite difficult to implement in these sectors.
Under Model GST Law, the framework does not provide much benefits or consideration to
banks and NBFCs on an understanding of the type of transactions made by them on a
consistent and voluminous basis.

17
 NIFTY and Bank
30000.00

25000.00

20000.00

15000.00

10000.00

5000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 Bank

 With the expectation of further details to emerge, financial sectors face a can of worms in
terms of the manner of transacting business, customer profiles, services matrix, IT systems
and operation to capture the data at both front and back end. IT systems will need to be more
vigilant in terms of serving the purpose of solving the complexity related to GST compliance
and procedures at a higher volume.
 The impact of GST on Banks and NBFCs will be such that operations, transactions,
accounting and compliance will need to be reconsidered in its entirety.

IV. IT

GST on IT sector will attract 18% on software services provided by software companies. For
purely software services, the cost of such services will increase under GST. All businesses,
large or small are rushing to get their accounting systems and ERPs in sync with GST. This
will mean an increase in infrastructure costs and changes in business systems. Most large
companies have set up teams consisting of their own technical experts, finance experts, and
an expert from their GST software vendor.

18
 NIFTY and IT
14000.00

12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 IT

 Although the GST rate for services has increased to 18%, IT industry will definitely benefit
from GST, thanks to the immense boost in the sale of the software. Other factors like
availability of ITC will bring down the operating costs and thus, it will increase the overall
profitability of the IT sector.

V. Media

Prior to introduction of GST, the rate of Entertainment Tax (a major tax component) for the
film industry varied from state to state, ranging from 15% to 110%. Implementation of GST
has stabilized the rate variance and provides a uniform market across the nation, which in
turn prevents the arbitrage.

However, the risk of an additional tax (i.e. local body entertainment tax, as proposed by some
states) could again create market and price differences The government, in its rate
rationalization exercise reduced the GST rate from 28% to 18% on amusement parks. And,
cinema owners have also called for reduction in GST on tickets above 100 INR, which
presently attracts 28% GST, through a public appeal in leading newspapers. The cinema
owners would now be able to use taxes paid on procurements, to set-off their output tax
liability. Earlier payment of entertainment tax was a sticking cost to screen owners.

19
 Nifty and Media
12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 Media

 While the entertainment industry feels that these rates are very high, it is even more
concerned that the GST Council will allow individual states to levy an additional local body
tax (LBT). This would make movies the only products and services with dual taxation.

 Levying an LBT would be at the discretion of individual states, and LBT tax rates could vary
across the country.

 According to several media industry executives and tax experts, some states, including
Maharashtra, Madhya Pradesh, Gujarat, and Rajasthan have already said they will levy this
LBT on cinema, cable, and DTH services. Other states, including Kerala, have decided
against the idea.

VI. Pharma

On the whole, GST is expected to benefit the pharma and healthcare industries. It will create
a level playing field for generic drug makers, boost medical tourism and simplify the tax
structure. If there is any concern whatsoever, then it relates to the pricing structure (as per
latest news). The pharma sector is hoping for a tax respite as it will make affordable
healthcare easier to access by all.

20
 Nifty and Pharma
12000.00

10000.00

8000.00

6000.00

4000.00

2000.00

0.00
Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Sep-17 Nov-17 Dec-17

NIFTY 50 Pharma

 Goods and Service Tax is having a constructive impact on the Indian Pharmaceutical
Industries as it has increased the manufacturing cost. Most drugs mentioned in 5% tax
bracket under GST were previously covered in 4% tax bracket under VAT. It will eliminate
the cascading effect of multiple taxes applied on One Product. Under GST, Ayurvedic
medicines could get costlier as they would be taxed at the rate of 12% which were earlier
covered by 4% tax bracket under VAT regime. Because of this hike in the tax rates, MRP
has to be revised to absorb overall effect.

 As GST is applicable on phases of the supply chain, it will have a negative impact on Free-
drugs samples, Bonus/Discount Schemes, Inter-state stock transfer, etc.

VII. Metal

Iron and steel are primary requirements of the construction industry and are commonly used
in the manufacturing of machine parts. We will do a comparison of the tax rates charged
under the current laws on iron and steel and the rates under GST.
There are three different kinds of taxes that are currently levied on the manufacture of iron
and steel(in any form) and reaching the end-consumer.

Excise Duty at the rate of 12.5%

Average VAT at the rate of 5%
Central sales tax(CST) at the rate of 2%.

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 A net tax of 19.5%(12.5+5+2) is charged on iron and steel under the current laws. Articles
made of iron and steel are also charged at the same rate except for Punjab where the VAT
rate for articles of iron and steel is 2.5% currently.

NIFTY and Metal

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NIFTY 50 Metal

 Kitchen utensils like stainless steel cooker, pan etc are likely to get a little cheaper as they are
charged at the rate of 12% under GST from the current tax rate of 19.5%. Barbecue sets would
get costlier under GST as it will be charged at the rate of 28% higher than the current rate of
tax. Laying of railway tracks would be largely neutral under GST. Sanitary items like taps,
faucets etc would get costlier under GST as they are also kept under the 28% tax bracket.
 Iron and steel industry would initially have a higher cost due to transition and increase in
working capital requirement but in the long run will be beneficial in light of the expected
reduction in logistics and lower tax on inputs under GST.

VIII. Energy

The energy sector is a principal driver for the financial development, however, remains
tormented by strategy and administrative bottlenecks. The absence of go through of indirect
taxes adds to the wasteful aspects that have crawled into this industry. Sadly, this heritage
issue is set to proceed under the Goods and Service Tax (GST) administration, with era and
offer of power being kept outside the domain of GST yet capital products and ventures
utilized as a part of the vitality segment being brought into the GST net.

As of now tax concessions and exclusions, both at the Central and State level are accessible
on determined merchandise and enterprises which are utilized as a part of the energy industry.

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 Be that as it may, with the GST administration by and large set to trim such exceptions and
concessions, the impact on the energy industry might be noteworthy.

NIFTY and Energy

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NIFTY 50 Energy

 Energy is one of the primary industries in any economy since power is a key prerequisite for
each and every business activity. Any tax bending perversion by this sector by virtue of
power being outside the range of GST will have a falling impact on the remaining economy,
discrediting a portion of the very advantages looked to be achieved by the introduction of
GST. Likewise, it is felt that the Government has missed a chance by not linking power
generation and power distribution with different supplies which associate with it, under the
purview of GST. In this way, the practicality of the energy segment, under the current GST
norms, would rely on the exclusions and concessionary impose which might be set up to
counter the effect of various tax regimes on the information and yield side. Exclusions in
renewable should be grandfathered for this sub-segment to stay practical

 In the long haul, the GST’s effect is probably going to be levelled out by falling expenses.
“We needn’t bother with help of lower taxes to empower sustainable power source. The
Renewable Energy industry in India will likewise profit by a speedier development in the
Indian economy which will build the general interest for the Renewable vitality environment.
The solar power industry in India will confront some transient agony yet will pick up over
the long haul.

IX. MNC

With the introduction of GST, Countervailing Duty (CVD — generally 12.5 percent) and
Special Additional Duty (SAD — generally 4 percent) are both discontinued. As such, any

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 imports will remain subject to Basic Customs Duty and now also IGST. One key difference
for imports vs. other GST transactions is that IGST will be collected by the state at the time
of import by customs, rather than as part of the monthly GST returns process. Companies
will need to track their import transactions separately to be able to claim the taxes already
paid.

NIFTY and MNC

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NIFTY 50 MNC

 Even after the implementation of IGST it was noticeable that the growth of MNC sector did
not come to a halt. Since there is not much difference there is continuous growth of prices of
MNC stocks in NSE.

X. Infrastructure

According to the government, total infrastructure spending is expected to be about 10% of

GDP (gross domestic product) during the 12th Five-Year Plan (2012–17), up from 7.6%
during the previous Plan. A total of 6,604km has been constructed out of the 15,000km target
set for national highways in 2016-17, says the ministry of road transport and highways. The
Airports Authority of India plans to develop city-side infrastructure at 13 regional airports,
with help from private entities for building of hotels, car parks and other facilities. Significant
allocations have been made to power, urban development and inland waterways sectors. The
above initiatives show the firm commitment of the government to infrastructure.
The real estate sector is one of the most pivotal sectors of the Indian economy, playing an
important role in employment generation in India. The probable impact of GST on the real
estate sector cannot be fully assessed as it largely depends on the tax rates. However, it is a
given that the sector will see substantial benefits from GST implementation, as it will bring
to the industry much required transparency and accountability.

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 NIFTY and Infra
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NIFTY 50 Infra

 The only respite has been to allow set-off of MAT paid against future tax liability for 15 years
as against 10 years. The intent and willingness of the current government to go the extra mile
for overall growth, has been well received. With time, industry expects more clarity in GST
and a reduction in corporate tax rate to make up for withdrawal of direct tax incentives. These
measures will propel much-needed growth for India’s infrastructure.
 Infra will not be a much affected industry and shows a stability in prices from before to after
implementation of GST.

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 CHAPTER – 5
FINDINGS AND CONCLUSIONS

Consolidated Trend
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NIFTY 50 FMCG Auto Bank Fin. Services IT

Media Metal Pharma Energy MNC Infra

FINDINGS
 FMCG, Bank, Pharma, Energy showed a significant decline after the estn ablishment of
new GST Policy.
 All industries showed a stagnant growth.
 Bank, Media, Metal and Infra remained static and were not affected by new GST Policy.
 Creation of the one-nation, one-market and one-tax system would greatly benefit the
common man. The GST Council has finalized a four-tier tax structure of 5%, 12%, 18%
and 28% but has left room for the highest slab to be pegged at 40% with essential items of
daily use being kept in the lowest bracket of 5 percent.

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CONCLUSION

The organized sector aligned their processes and information technology (IT) systems. As various
establishments moved to clear their inventory at sheer reductions and manufacturing is stopped to
avoid building up inventory, disruption was witnessed before the July 1 roll-out date. This led to
a jump in sales at the cost of margins in the month of June, while a slackening in demand may
ensue in the following months.

Before GST tax regime, service tax is applicable at the rate of 15% on Services rendered which
includes 0.5% for Swatch Bharat Cess and 0.5% for Krishi Kalyan Cess but it is expected that
under GST regime services will be charged by higher rate of tax upto 18% which will make the
services and works contracts costlier. Revenue secretary also mentioned the level of taxation which
will be increasing in the GST structure as the minister was sure and told that, the service sector is
likely to get a higher taxation up to 18 percent from the current 15 percent in the upcoming Goods
and services tax framework.

The transport sector, for example, attracts lower than 15 percent tax right now. We will put these
in either 5 percent or 12 percent.” But he assured that many services currently operating in 15
percent tax rate may have a lower tax rate in future. It will create a level playing field for generic
drug makers, boost medical tourism and simplify the tax structure. If there is any concern
whatsoever, then it relates to the pricing structure (as per latest news). The pharma sector is hoping
for a tax respite as it will make affordable healthcare easier to access by all.

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REFERENCE:

Articles

 A Review on Goods and services tax (GST): A panacea for Indian economy & its impact
on various sectors by Karteek Madapana, Kotini Avinash Gupta

 Effect Of GST Rate Announcement On Sectorial Indices Of National Stock Exchange by

Lakshmi B., Rebecca J. Alex (January, 2018)

 A Review of Goods and Services Tax (GST): Impact on Indian Stock exchanges and
various stock Sectors by Mr Priyanshu Sharma, Dr Manoj Sain

Websites

• https://www.nseindia.com

• www.bseindia.com

• http://www.gstindia.com

• http://www.gstseva.com

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