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GST And FMCG; Stocks Recorded a Raise like Never Before

Most FMCG stocks were trading higher on Monday as historic GST (Goods and Services Tax) was rolled out at a special joint midnight session of Parliament on 30 June.

Right from the beginning of this year, FMCG stocks have surged as much as up to 300% on expectations that the implementation of GST will lower the tax burden on consumer goods and boost the business with ease in the movement of goods, which will be a win-win situation for both, consumers and companies.

The FMCG blue-chips have risen in the range of 24%-42%, with four stocks outperformed the benchmark BSE FMCG index, which has returned 34.42% in the first half of the current year 2017.

Shares of ITC Ltd are up 42.31% since the beginning of this year, Hindustan Unilever Ltd is up 32.41%, Godrej Consumer Products is up 29.81%, while Britannia is up 28.79%. Another blue-chip, Colgate-Palmolive has risen 24.3% since January.

Analysts say that post GST implementation, most FMCG companies will be able to generate substantial savings in logistics and distribution costs as the need for multiple sales depots will be eliminated.

At the moment, FMCG companies end up paying nearly 24-25% taxes including excise duty, VAT and entry tax. With a tax rate of 18% under GST, there could be a significant reduction of 6-7% in taxes.

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