Britannia Industries and Tata Tea have stopped supplies to distributors in Kerala, who are seeking protection of their margins after the goods and services tax (GST) was imposed. Industry sources said these companies had sales of Rs 500 crore and Rs 200 crore in Kerala, respectively, every month.
Shyam Prasad Menon, president of the Federation of South India Distributors’ Association, confirmed the development. Emails to Britannia and Tata Tea went unanswered.
With the GST, compliance costs for distributors of consumer goods have gone up, squeezing their 3-5 per cent profit margins to 1-1.5 per cent. Around 81 per cent of consumer goods, which were earlier taxed at 28-32 per cent tax, have been brought into the 18 per cent GST
“Kerala has taken a strong stand on distributor margins. We are not demanding any particular increase in margin, but there should be an increase. We are with Kerala and we have formed a council to take further steps on the issue,” said Dhairyashil Patil, president of All India Consumer Products Distributors’ Federation.
“We asked all FMCG companies to increase the margin. Many responded positively,” said Menon, adding Johnson & Johnson had increased distributor margins by 2 per cent, Unibic Biscuits by 0.65 per cent and Cadbury by 0.5 per cent. Other companies were open to discussion, but Britannia and Tata Tea had decided to stop supplies, Menon said.
The two companies have 62 dealers in Kerala.