GST positive for port logistics, paints, adhesive firms: ICRA
Paints and adhesive companies should be benefited by lower effective tax rate.
The Dollar Business Bureau
The introduction of the goods and services tax (GST) is a critical and long-awaited tax reform, which intends to simplify and rationalise India's indirect tax regime. There is some uncertainty as to whether the GST can be implemented on a pan-India basis from April 1, 2017. Several key variables are yet to be finalised, which are likely to affect the impact of the GST on ease of doing business.
According to ICRA’s Senior Vice President and co-head of Corporate Sector ratings, K Ravichandran, implementation of GST will be positive for some of the port logistics players such as CONCOR, Gateway Distriparks and All cargo Logistics as GST will lead to a realignment of warehousing and supply chain requirements of companies.
The introduction of GST should lead to increased demand for Inland Container Depots (ICDs), Container Freight Stations (CFSs), Multi modal logistics parks and container trains. While service tax burden will increase, the industry should be able to pass it on to trade without impacting their margins, he said.
ICRA expects paint companies, such as Asian Paints, Berger Paints and Kansai Nerolac, to be significant beneficiaries of GST roll out as the effective tax will reduce to around 18% from the current 26-28%, some of which could be retained by the industry due to their branding strengths.
Moreover, there is sizeable unorganised market (nearly 35%) in the paints industry, whose market share should decline as the pricing gap will decline versus the organised players. This should help established paint companies to expand volumes.
As per ICRA, adhesive companies such as Pidilite Industries and Astral Poly Technik should be benefited by a lower effective tax rate to around 18% from the current 26-28%, some of which could be retained by the companies because of their branding strengths. These firms could be benefited by a gradual reduction in competition from unorganised players as the pricing gap reduces between them.
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