Eicher Motors falls 5% on weak December motor cycle sales; Motilal Oswal maintains buy

The company's December total motor cycles sales were down 13 percent at 58,278 units against 66,968 units, YoY.

Shares of Eicher Motors slipped 5.6 percent intraday Wednesday after company reported weak motor cycle numbers for the month December 2018.

The company's December total motor cycles sales were down 13 percent at 58,278 units against 66,968 units, YoY.

Meanwhile, its CV sales for the month was up 2.4 percent at 6,236 units versus 6,087 units. Its exports went up 41 percent at 2,252 units against 1,601 units, YoY.

According to Motilal Oswal Royal Enfield is a big disappointment; lower Royal Enfield volume estimates for the current and the next financial year by 46,000 and 89,000 respectively.

It cuts EPS estimates by 6 percent and 9 percent for the current and the next financial year respectively.

Meanwhile brokerage house maintained buy call on share with target of Rs 24,760 per share.

According to Morgan Stanley, auto sales end the year on a weak note. Year-end inventory clearance & weak consumer sentiment lead to another month of muted volumes.

It prefers OEMs that have support ahead from model launches like Maruti Suzuki, M&M & Eicher Motors.

At 09:35 hrs Eicher Motors was quoting at Rs 22,000, down Rs 1,184.05, or 5.11 percent on the BSE.

Source: https://www .moneycontrol.com/news/business/stocks/eicher-motors-falls-5-on-weak-december-motor-cycle-sales-motilal-oswal-maintains-buy-3344761.html 

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GST rate cuts try to be pragmatic, populist and helpful to some industries

The rate cuts are likely to fall short of the Street’s expectations, as rates on goods such as cement and some auto parts that were in the highest 28 percent slab were not reduced.

The GST Council has decided to cut tax rates on a number of goods and a few services. While the notional revenue loss has been pegged at Rs 5500 crore, the government will hope that better compliance and consumption growth can compensate for lower rates.

The rate cuts are likely to fall short of the Street’s expectations, as rates on goods such as cement and some auto parts that were in the highest 28 percent slab were not reduced.

There was political messaging that was visible in the rate cuts. Taxes on walking sticks were cut from 12 percent to 5 percent, a nod to senior citizens who form an important vote bank. Similarly, the rate differential in movie tickets above Rs 100 and below that was maintained. Also, taxes for televisions were lowered but only for screens up to 32inches. With elections around the corner, the government will be keen to reiterate that it’s on the side of the common man.

Let’s look at some of the main rate cuts

The multiplex industry will be happy with the reduction in GST rates, from 28 percent to 18 percent on tickets above Rs 100 and from 18 percent to 12 percent on tickets below Rs 100. Since most tickets in metro locations are above Rs 100, the reduction will benefit them. The rate reduction from 28 percent has been a long-standing demand of multiplex operators. They will eventually benefit from lower taxes, although initially they may have to lower ticket prices to pass on benefits to consumers. Listed companies such as PVRand Inox Leisure should benefit.

In auto components, those falling in one category HS Code 8483, comprising transmission shafts, gears and gearboxes have also seen rates decline from 28 percent to 18 percent. This will benefit companies although the net benefit depends on how much input tax credit is being availed.

The government has also clarified on the taxation on supply of renewable energy plants, including solar power plants. While the devices and parts used to make these plants were taxed at 5 percent GST, since these plants may be set up as part of a comprehensive contract, disputes arise on the levy of tax. Thus, the tax could be 5 percent or 18 percent leading to confusion. Now, where there is an engineering services contract to set up a renewable energy plant, 70 percent of the gross value will be treated as goods with a 5 percent tax and the rest will be treated as services. This will lead to a more certain tax regime for such projects.

Although the breadth of cuts may have disappointed some, the government could introduce one more round of tax cuts when the interim budget is presented.

Among the decisions of the GST Council, the rate cuts may have got all the attention, but the setting up of a 7-member group of ministers merits equal attention. GST revenues have been falling short of original estimates, especially in some states, and this GoM has been tasked with finding out why. While the process may take time, it could set the stage for some structural changes to the GST superstructure.

It is this shortfall in revenue that is staying the government’s hand from taking up a bolder rationalisation of tax rates.

Source: https://www .moneycontrol.com/news/business/economy/quick-take-gst-rate-cuts-try-to-be-pragmatic-populist-and-helpful-to-some-industries-3319991.html 

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GST Council to meet on Saturday amid rate cut talk, but some states not fully on board

The Council will also likely discuss a proposal to lower the cess on plug-in hybrid cars to bring down effective tax incidence for such vehicles from 43 percent

The Goods and Services Tax (GST) Council will meet on December 22 amid heightened expectations that the panel will cut rates on several items, although some states want the move’s impact on revenues to be fleshed out in greater detail before levies are lowered.

A discussion on the revenue position of the Centre and states, easing refund-related rules for exporters, is also likely to be on the agenda.

The Council, headed by finance minister Arun Jaitey is the highest decision making body of the new indirect tax system that came into effect from July 1, 2017.

It is also expected to take up the issue of transferring ownership of the IT backbone GST Network in a government owned company, a proposal that was approved by the Cabinet in September, sources said.

In addition, there could be discussions on reducing cess on plug-in hybrid cars, which currently falls in the 28 percent tax slab. However, the overall tax incidence for the green vehicle is 43 percent right now.

It is learnt that the road ministry has proposed bringing down the tax liability to 35 percent.

Rate cuts have always been a contentious issue as the Centre and states have to come to a consensus. In that light, the meeting assumes all the more significance, coming as it does after the recent elections in five states that saw the Congress wresting power in all the three Bharatiya Janata Party (BJP)-ruled states.

Days ahead of the meeting, Prime Minister Narendra Modi said the government wants to ensure that ‘99 percent things’ attract GST at 18 percent or lower rate.

“Today, the GST system has been established to a large extent and we are working towards a position where 99 per cent things will attract the sub-18 percent GST slab,” Modi said, while also hinting that the highest  tax slab will be restricted to luxury and sin goods.

A range of goods from air conditioners to dishwashers, from television sets to digital cameras could become cheaper,  if the Council expected to slashes rates to 18 percent on all products in the 28 percent slab, except demerit goods, cement and automobiles.

This could effectively set 18 percent as the highest GST tax slab, except only two broad categories of goods and services.

Over 1,200 goods and services fall into four broad tax slabs- 5, 12, 18 and 28 percent. Currently, there are close to 40 goods and services in the 28 percent slab, which comprises demerit and luxury goods, among other items.

The move comes barely four months ahead of the crucial Lok Sabha elections in April-May, 2019. The cut in rates, however, could affect GST revenues, given that the collections are still short of the budgeted target.

The last major round of rate cut happened in July when the Council decided to cut tax on 80 items. The government, then, had to forego revenue worth of Rs 10,000 crore-Rs 11,000 crore annually.

Source: https://www .moneycontrol.com/news/business/economy/gst-council-to-meet-on-saturday-amid-rate-cut-talk-but-some-states-not-fully-on-board-3316281.html

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