New Delhi, Sep 4 The GST Council's decision to abolish the 12 per cent and 28 per cent indirect tax slabs and to have only 5 per cent and 18 per cent slabs is a silent yet deep-impact reform that will boost consumer sentiment and set the stage for the equity market's trajectory, a report said on Thursday.
"This is the first big reform measure of the government in the current term, which will boost consumer sentiment and provide a consumption fillip. The measure should support growth and encourage longer-term capacity building to drive the economy toward greater self-reliance in a volatile and uncertain global scenario," said Motilal Oswal Financial Services in its report.
The approved measures are likely to yield economy-wide benefits and favorably impact several sectors such as Automobiles (across most segments), Consumer Durables, Consumer Staples, Cement, Hotels, Insurance (retail health and life), Retail, Renewables, Oil and Gas, and Banks and NBFCs.
According to the report, given the wide-ranging effect of the measures, many domestic-focused stocks are likely to benefit.
The resolute stance on simplifying the GST structure should not be seen just as tax reform, but more as ‘growth reform'.
As per the report, through simplified rates and processes, the government intends to boost consumption sentiment.
"As the Prime Minister Narendra Modi has indicated, there will be further reform measures across multiple domains, intended to unleash the animal spirits of the economy, providing a shield against the global geopolitical headwinds," the report highlighted.
The council has endeavoured to resolve the vexatious inverted duty structure in several segments, such as textiles and fertilisers, while rendering the ITC claim process easier now.
Moreover, this will also help in transitioning toward a faster release of blocked credit, a major pain point for MSMEs, and enhance the ease of doing business, unlocking this critical segment of the economy, the report stated.
The wide-ranging GST reforms are set to improve lives of citizens and ensure ease of doing business for all, especially small traders and businesses, thus strengthening the economy.
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