Snack stocks, Bikaji Foods International, Gopal Snacks and Prataap Snacks shares rallied up to 10% on Tuesday after a cut in GST on namkeen. The government, in the 54th GST Council meeting, decided to reduce the Goods and Services Tax (GST) levied on Extruded Namkeen snacks to 12% from 18% earlier.
Bikaji Foods share price gained as much as 7.76%, while Gopal Snacks share price jumped 10% and Prataap Snacks shares surged 8.05%.
The GST rate on namkeen or savoury items like fruit and vegetable chips, bhuijas, and other snack foods etc. are already at 12%. Monday’s GST rate cut was on extruded snacks, which aligns with that of other savoury snacks.
The GST rate of extruded or expanded products, savoury or salted (other than un-fried or un-cooked snack pellets), falling under HS 1905 90 30 has been reduced from 18% to 12% at par with namkeens, bhujia, mixture, chabena (pre-packaged and labelled) and similar edible preparations in ready for consumption form which are classifiable under HS 2106 90, according to the official release.
The GST rate of 5% will continue on un-fried or un-cooked snack pellets, manufactured through the process of extrusion.
“Snacks stocks are rising after the reduction in GST rate from 18 per cent to 12 per cent. In the current market, FMCG stocks are attracting fresh buying, and this GST rate reduction has triggered fresh buying. This is the current short-term sentiment driving snack stocks like Gopal Snacks, Bikaji Foods International, etc,” said Saurabh Jain, Deputy Vice President — Research at SMC Global Securities.
Jain suggests one can buy and hold Bikaji Foods shares for the medium to long term.
Avinash Gorakshkar, Head of Research at Profitmart Securities expects these stocks to remain in focus amid fast-approaching festival seasons as snack companies are expected to reap an added business.
“During festival season, these companies’ products are used for gifting purposes, and hence, the market is expecting a better quarterly number from these FMCG snack companies. So, one can hold these stocks for the medium to long term as well,” Gorakshkar said.
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