Broking firm CLSA has upgraded its rating on Titan Company Ltd. to ‘Buy' from ‘Outperform' after the Goods and Services Tax (GST) Council finalised lower-than-expected rates for gold jewellery on Saturday.
The GST Council decided to tax gold, gold jewellery, silver and processed diamonds at 3 percent under the new taxation regime, below CLSA's expectations and also ended the uncertainty surrounding the sector, said the brokerage house.
The report added that the finalised rate is only marginally higher than the current effective tax rate of a little over 2 percent but considerably lower than the expected 6 percent.
Improved compliance under the GST regime would create a level-playing field and help the organised sector, and in this case, Titan stands to benefit considerably, CLSA said. Consequentially, the 12-month target price for the company's share was also increased to Rs 620 from Rs 550.
Thiscomes as a relief given gold was expected to be almost like a balancing figurein some sense as taxes on most other products had already firmed up. There wasspeculation of a higher tax rate given states like Kerala were advocating for ahigher tax rate of 5 percent.CLSA Report
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