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The goods & services tax (GST) has moved closer to becoming a reality by July 1, 2017. The GST Council earlier this week fixed tax rates on 1,211 items and released the final list of GST rates for 98 categories of goods. Although the market has already priced in all the good news about GST, but successful implementation is likely to boost the confidence of investors and improve earnings growth of companies has remained flat or in single digits for the past 4-8 quarters.

Equity markets mirror the economic fundamentals and if GST is likely to add to that strength, investors have nothing to worry about.

Push GDP rates by 2-2.5 percent

GDP growth is always seen as the strength of any economy. India is growing at a pace of 7 percent and some experts feel that implementation of GDP could well add another 2 percent to its growth rate over a period of time.

Earnings growth for companies

Implementation of GST will lead to higher economic growth and boost earnings for companies. “As tax rates on mass consumption items come down triggering inflation downtrend, economic growth will be bolstered and support the bottom lines of most firms. This sounds good news for the market as earnings will get better.

Sectoral Impact

As GST is one of the biggest tax reforms to be rolled out, it would go on to boost the positive sentiment for the markets. “Sectors which could see a benefit due to the GST rates announced till now would include FMCG, utilities and other metal companies that use coal as an input, dairy, etc.