India Inc, which was recovering from the demonetization move, has been hit by Goods and Services Tax (GST). Credit rating agency, ICRA in its latest report has said that the profitability of India Inc got hurt with the margins contracting by as much as 1.80% to 15.7% on a year-on-year basis on account of introduction of new tax regime.
As per the report, the aggregate revenues growth rate of 448 companies reduced to 5.3% in the preceding January-March period, as against growth rate of 8.3% in the quarter-ago period and 10.6% in the year-ago period and this has led to a major contraction in profit margins of India Inc. The rating agency further noted that companies’ rushing to clear inventory by offering discounts and lower primary sales ahead of the GST rollout, were the main reasons for fall in earnings.
ICRA also blamed recovery in raw material prices for contraction in earnings across few sectors, noting that sector-specific dynamics like increasing competitive pressure in telecom and regulatory hurdles in pharmaceuticals played a spoil sport.