According to a Morgan Stanley Report, it is revealed that after the introduction of Goods and Services Tax Regime (GST) has made a reduction in India’s Inc net income for the first quarter of 2017. Since five quarters, the net profit growth of the nation reduced by 11 percent.
As per the global brokerage firm, new indirect tax regime was implemented on 1st July has adversely influenced the net profits growth for the period of April- June 2017 of the current fiscal, the companies including materials and consumer discretionary shared their burden and after the execution of the new indirect tax regime.
According to the report, “Companies in the materials, consumer discretionary and consumer staple sectors reported impact (from GST execution).” The report added that “Most of the impact was caused by channel destocking and dealer incentivisation which probably explains why both revenue growth and particular margin performance was weak in the quarter for these sectors.”
Some of the sectors such as Financials, Utilities, Telecom and Technology companies did not reveal the impact of GST on their earnings. Although, the corporates revenue growth enhanced by 10 percent which is the highest from past 12 quarters, for the April- June duration of 2017, as compared to previous year in a similar period.
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The report said, “Broad market (1020 companies) revenue growth accelerated to 10 per cent year-on-year even as the net profit fell 11 per cent year-on-year.” The report reveals that the broad market companies revenue growth enhanced by 10 percent year- on- year whereas the net profit reduced by 10 percent year- on- year.
Commodity-linked sectors including energy, materials, and utility companies have reported the robust revenue growth, whereas the Telecom and consumer discretionary companies have reported the most reduction in net profits.
The report further added that broader sample of 2629 company’s revenue increased by 9 percent, whereas, net profit growth reduced by 11 per cent for the first quarter of 2017 as compared to previous year.
