Tractor Stocks Surge as GST Council Slashes Tax Rate from 12% to 5%
The GST Council reduced the tax rate on tractors from 12% to 5%, causing tractor manufacturer stocks to surge. Escorts Kubota shares rose 8.70%, VST Tiller Tractors gained 4.00%, and Mahindra & Mahindra increased by 6.50%, reaching an intraday record high. The tax cut also applies to tractor tyres and parts, now at 5% from 18%. This move is expected to lower tractor costs, potentially boosting demand in the agricultural sector.
*this image is generated using AI for illustrative purposes only.
The Indian tractor industry received a significant boost as the Goods and Services Tax (GST) Council announced a reduction in the GST rate for tractors from 12% to 5%. This decision triggered a rally in shares of tractor manufacturers, with some stocks surging up to 11%.
Market Response
The stock market responded enthusiastically to the news, with several tractor manufacturers seeing substantial gains:
- Escorts Kubota Ltd.: Shares surged 8.70%, trading at ₹4,000.00.
- VST Tiller Tractors Ltd.: Initially jumped 17.00% in pre-open trading, settling at a 4.00% gain to ₹5,315.00.
- Mahindra & Mahindra: Gained 6.50%, hitting an intraday record high of ₹3,550.00.
- Swaraj Engines: Posted gains similar to other tractor manufacturers.
GST Rate Reduction Details
The GST Council's decision extends beyond just tractors:
- Tractor GST rate reduced from 12% to 5%
- GST on tractor tyres and parts also cut from 18% to 5%
This comprehensive reduction is expected to have a significant impact on the entire tractor manufacturing ecosystem.
Impact on Major Players
Escorts Kubota Ltd.
Escorts Kubota, a major player in the tractor industry, stands to benefit significantly from this tax cut. The company derives 87% of its topline from Agri Machinery products in the first quarter, making it particularly sensitive to changes in tractor-related taxation.
Mahindra & Mahindra
For Mahindra & Mahindra, tractors contribute 33% of domestic volumes and 25% of topline. The GST rate cut is likely to boost its tractor segment performance.
Industry Outlook
The reduction in GST rates is expected to lower the cost of tractors and their components, potentially stimulating demand in the agricultural sector. This move could lead to increased sales and improved affordability of tractors for farmers, contributing to agricultural mechanization efforts.
Company Updates
While not directly related to the GST rate cut, it's worth noting that Escorts Kubota Limited has been actively engaging with the media. According to recent corporate announcements:
- Mr. Bharat Madan, Whole-Time Director and Chief Financial Officer of Escorts Kubota Limited, is scheduled to participate in a live interview with NDTV, an English news channel.
- The interview has been rescheduled to approximately 09:40 AM (IST).
This media engagement suggests that the company may provide further insights into how the GST rate cut could affect their business operations and the broader tractor industry.
The GST rate reduction on tractors and related components is a significant development for the agricultural machinery sector. As the market reacts positively to this news, it will be interesting to observe the long-term impact on tractor sales, farmer accessibility, and the overall growth of the agricultural sector in India.
15
