Nobody is fully prepared for the GST. Everybody is learning along the way and so are we. I believe there are multiple implications due to this tax reform. The near-term will be challenging as most will struggle to adapt to the new regime. In the long run, however, there are benefits; the biggest being the ease of doing business. For retailers, benefits accrue at the front as well as back-end. At the front-end, they will be able to set up more stores because execution challenges will reduce. At the back-end, the logistics and warehousing issues will ease. It will become more efficient because of the concept of a unified market.
Top retailers recently met to discuss some of the challenges the industry would face. What were these?
The discussion was about pricing and protection of margins. Our point is that: Will margins (of retailers) get squeezed in the event if there are price hikes? How are FMCGs dealing with this issue and what will be the impact on consumers and retailers due to this? What is the extent of price hikes? There was a need to come together and put our minds to these issues.
There are also some other teething problems that require attention such as including GST as a component in the product price as opposed to raising a separate bill for it. There are also discrepancies that could creep in due to the variable GST structure on products. For instance, packaged commodities will be charged at 5 per cent, while those sold loosely will be exempt from GST. How do we deal with this dynamic?
Future Group is also a manufacturer and distributor of consumer products through Future Consumer. Do you propose to raise prices of your products once GST kicks in?
No, we do not propose to raise prices. Our plan is to reduce product prices by 2-22 per cent across categories. This is because GST rates will be lower.This will be beneficial to consumers.
Will that give you greater scope to compete with e-tailers, whose biggest advantage is lower price that they bring to the table?
I can only speak for myself. We will bring down prices across products, so I see this having a positive impact on business. What is happening to that industry (e-tailing) is something that is visible to all. But I do think that everybody will do what is right for their respective businesses.
What are the investments that you’ve made in your business to be GST-ready?
We are ready to file invoices based on the new structure on July 1
. We had set up teams internally to help us make that shift.
However, I cannot specify details because we are in the midst of this (transitioning to the new regime). But there are gains that accrue at a broader level. The whole way of doing business will change. Assessing that and making the right investments will take time.