Integrating GST Into The Retail Universe
The industry is putting in extra hours to be on track
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Rahul Choubey, a resident of Gurgaon, bought seven pairs of jeans for Rs 5,000 from the clothing brand Lee. Diwali has come early thanks to GST, says Choubey. “The MRP of the jeans is Rs 2,399 each and I got it for Rs 700.” he says.
Like Lee, all the leading brands are persuading customers to visit their stores with lucrative offers. One of the sales executive of clothing brand Park Avenue says, “We need to clear our old stock before the GST roll out, the season sale has come early this time.”
Retailers from across the categories are having concerns about its implications after 1 July. Earlier in June, Retailers Association of India (RAI) conducted a meeting with leading retailers such as DMart, Future Group, Aditya Birla and Trent Hyper City to discuss pricing and margins. The crux of the meeting was to approach the government on issues like clarification of taxation for packaged goods. They pointed out, the 5 per cent tax on packaged goods will cause an inconsistency as loosely sold commodities are not taxed.
A joint report from Knight Frank India and RAI says the size of modern retail in India is expected to double to Rs 171,800 crore from Rs 87,100 crore in three years driven by omni-channel retail. Is this sector ready for the GST roll out? The sense is that retailers are preparing themselves to get ready for the new tax regime. In order to be familiar with the transmission, various retailer associations are working extra hours to be on track. Future Retail is looking to open more distribution centres that are closer to their retail stores. Currently, the group has distribution centres in Burdwan (West Bengal) and Nagpur (Maharashtra).
Rakesh Biyani, Joint MD, Future Retail, says, “ We have upgraded our technology platforms, our supply chain is ready to do centralised distribution and now we are mapping out further distribution centres, which will be closer to the places where we have retail stores today and where we can bring benefits of savings and optimising our cost place. We look at forwarding these savings back to the customers.”
All the leading manufacturers from across sectors are preparing to align with the new tax plan. Consumer durables maker Videocon tied up with Assocham to generate awareness and educate the retail partners around GST implications. The consumer electronics maker is planning to conduct 200 of such seminars to raise GST awareness across the country. Confederation of All India Traders (CAIT), Acer and Tally together launched Bizguru, a plug-n-play solution for traders’ to help in transition to GST.
The sole problem with the retailers is clarity about GST and its implications. Few of them highlighted that it may have a similar impact like demonetisation and some feel there may be an initial pinch in sales.
Adesh Gupta, CEO, Liberty Group and Chairman for Council for Footwear, Leather and Accessories is advocating for a uniform 5 per cent tax slab for two years “If the government feels that this industry is doing very well and the tax collection are not enough, they could increase the rate. But the challenge now is to integrate this sector because it is 80 per cent unorganised,” he says. Gupta hinted leather footwear is likely to see a price hike of 5-10 per cent.
All the retailers are not completely satisfied with the new format — non-luxury brands are unhappy with their tax rates while luxury brands or bridge-to-luxury brands are finding it difficult since they fall under the tax slab of 28 per cent.