GST transition pangs: Confusing times ahead for retailers, consumers

Thousands of retailers, manufacturers have no idea how they will bill customers from July 1

All that Samaresh Majumdar, owner of a grocery store in the upscale South Delhi neighbourhood of Chittaranjan Park, knows about the goods and services tax (GST) is based on news reports and rumours that are afloat among his fellow shopkeepers. He knows that prices of different items are set to change. But he still has no idea how he will bill his customers on July 1 or how much he will charge them for various items.

Majumdar is not alone. There are thousands of retailers, manufacturers and others like him across the country. 

Manufacturers are in the process of figuring out their pricing strategy, after the introduction of the GST. According to market experts, for consumers not much will change because prices will not go up till the time government changes certain rules and new inventory floods the market with the GST-incorporated maximum retail price (MRP). 

Relevant notifications of the effective tax slabs by the Centre and the states are a must for the new tax structure, say legal experts. “Although the GST Council has circulated the proposed rates of overall taxation, clarity on the final tax burden will be achieved only after these notifications are made,” says V Sivasubramanian, executive partner, indirect tax, Lakshmikumaran & Sridharan.

“If the government allows retailers and traders to put stickers of the new rates over the old MRP, rates would change in a few days. However, till the time manufacturers print the new rates on products, consumers would not have to pay the new GST rates,” says Praveen Khandelwal, secretary general, Confederation of All India Traders.

He, however, said that for the next few days, traders would suffer losses. “There are several products on which the tax is on the higher side. Initially traders would suffer losses as they cannot charge over and above the MRP and new rates would not be out soon,” he added.

Offline retailers plan to continue offering products at the old MRP even under the GST regime. Despite prospective changes in the tax rates of several consumer durables like air conditioners and refrigerators under the GST, most retailers will be selling these products with the old price tags.

Some retailers say they are still negotiating with manufacturers and marketers for compensation. However, a consumer electronic retail chain such as Vijay Sales plans to sell all products on July 1 after accounting in the additional tax burden. 

“We don’t see any issue with the old MRPs since usually appliances and electronic items sell at prices much lower than the MRPs. So, even after hiking prices in line with the new rates, selling prices will remain lower than the old MRPs,” says Nilesh Gupta, managing director, Vijay Sales. Gupta hopes primary purchases start from July 5 as manufacturers start dealing with distributors and retailers.

Kamal Nandi, vice-president, Godrej & Boyce, says it would take a couple of days to effect the new price structure once the government issues the notification. “We have a fair idea about what the pricing structure should be. Till then, we will continue with the current price tags,” he said. According to Nandi, it takes around a week for all retail points to reflect price tags.