The goods and services tax (GST) has come as a boon for consumers in the month of June. Distributors, dealers and retailers of consumer durables, fashion, apparel, lifestyle goods and luxury cars are liquidating stocks at breakneck speed as they seek to start afresh on July 1.
But while June has effectively become the festive month for these products, there is a flip side to this: the prospect of thin inventory held by trade in the period post GST, though companies insist the problem will be sorted out soon.
The post-GST period will coincide with the festive season, starting with Rakhi, Onam and Ganesh Chathurthi. This year, all of these fall in August, while Navratri is in September and Diwali in October.
Consumer goods companies are allaying trade partners’ fears over the new tax structure but most of the latter remain unclear about the impact of the GST on their business. They hope to get a clearer picture after July, following which they are expected to place their orders with companies. “Only after observing the full impact of the GST will trade partners place new orders. No one is interested in placing new orders at the moment," said CM Singh, chief operating officer, Videocon Industries.
“Supply-side constraints will lead to sales loss and we are engaging with trade partners to minimise the impact of a thin inventory pipeline. Since the trade remains disinclined to place fresh orders, increase in reimbursement should help. We are hoping business will be back to normal by the end of July,” said Ketan Patel, senior director, HP Inc.
Luxury car makers such as Mercedes Benz, Audi and Jaguar Land Rover are offering discounts on all models, which range from Rs 3 lakh to Rs 7 lakh per car, before the GST kicks in. “We decided to pass on benefits that will accrue in the GST regime so that there is no reason for people to postpone purchases. We have started to see footfalls come back,” said Rohit Suri, managing director, JLR India. The luxury car market in India did not grow last year. The GST rates on regular cars are in line with current tax rates and dealers are unlikely to keep pipelines thin post GST.
“Festive buying in India has its own clientele and buyers do not shift purchases to take advantage of incentives and offers. We do not see any change in festive season demand,” said Rakesh Srivastava, director, sales and marketing, Hyundai.