“Consumers are aware of the fact that prices may go up once GST
sets in. Also, discounts across stores have come to their notice. Most of consumers are coming here to seek special pre-GST
discounts. Footfall has gone up by 25 per cent and sales by over 30 per cent”, a Vijay Sales executive said.
As destocking at the trade level hits new high, consumer good firms in the country are preparing for a tough month ahead. While, companies in the sector are actively engaging with the trade partners in allaying their fears over the new tax structure, most of them are still clueless about the real impact of GST on the basic model of accounting and costing that they have been following for years. Come July, they are expecting to get a clearer picture and lay down their modified costing norms and, consequently, respective pricing strategies. Which leaves a vacuum in their supply chain.
Trade partners on the other hand, would be left with the minimal inventory at their end since pre-GST sales in full swing. For example, while small dealers and retailers in the consumer durable space maintain an inventory to feed them for 30 days, larger partners maintain a 60-day stock. However, from July 1, these will be almost nil as none are willing to bear the pain of claiming input tax credit on transitional stock– even though it has been raised from 40 per cent to 60 per cent recently.
According to C M Singh, chief operating officer, Videocon, business will spring back to normal, in terms of supply, by mid-July. “Only after observing the full impact of GST, the trade partners would prefer to place new orders. While, there is loss of business due to this, no one is interested in placing new orders at this moment. Fortunately, this a lean period as after a bumper sale during the March-June period, sales in July and August are usually low. It again starts picking up from September onwards. Thus, the impact is expected to be very low”, he said.
“It’s a fact that, primary sales growth has come down significantly in June, compared to the previous three months. We are currently preparing warehouses to get GST-ready and there are lots of procedural issues that need to be sorted. After all this is the transformation of the tax structure of a large country. But supply side issues should be a small blip. A better monsoon this year, backed by payments made by the government under the 7th Pay Commission scale should give a boost to the festive season sale. GST is unlikely to hamper the festive mood”, said Kapil Agarwal, vice president, marketing at Whirlpool of India.