India has adopted its most comprehensive indirect tax reform, the Goods and Services Tax (GST) – on July 1, 2017. It is expected that the GST will help remove tax barriers between states, creating a single market. The roll-out has replaced a plethora of cascading central, state, interstate and local taxes with a single, nationwide, value-added tax on goods and services.
Industry stalwarts share their views on how the retail industry will perform in the aftermath of GST roll-out and how the industry is gearing to face the initial hiccups arising from its implementation.
Arvind Mediratta, CEO & MD, METRO Cash & Carry, India
METRO is fully prepared for GST starting from July 01, 2017. A majority of our suppliers and manufacturers have integrated into the system. At the same time, more than 50 per cent of our customers, which comprise large and small traders and independent businesses, have registered for GST so far. METRO is assisting them to comply through GST expert helpdesks set up at each store and through its call centre helplines. It may take some time for businesses to return to normalcy post implementation but GST will bring significant tax benefits to our trader and business customers.
From the perspective of modern wholesalers like METRO, we see GST playing a transformative role in the Indian wholesale and retail market. It will lead to more transparency, free movement of goods, widen the taxable base of businesses and usher in new entrepreneurial energy into the marketplace. We look forward to GST creating one unified national market where benefit of supply chain efficiencies, elimination of multiple taxation and online integration of tax information will bring immense benefits to businesses and consumers in the long run.”
Krish Iyer, President and CEO, Walmart
“We are very appreciative of the GST, particularly the changes that will come into effect from July 1, and we believe that GST will be a game-changing reform, and will remove a lot of barriers which currently exist.”
Ashwin Khasgiwala, CFO, Reliance Retail
“We are not expecting any impact on sales. What we expect is that there is going to be better compliance throughout the country. It will help more towards digital economy as everybody will be giving electronic invoices and data will be flowing more electronically.”
Oliver Mirza, Managing Director & CEO, Dr. Oetker India Pvt. Ltd.
“We look forward to a successful implementation of the much-awaited Goods and Services Tax (GST) by the Government of India. The effects of GST are likely to be positive on the market overall and FMCG industry in particular will be benefited. This move will not only drive the supply-chain efficiency, but will also bring the entire nation under unified tax regime, which means ease of doing business for corporates like us. Future of our core categories which include sauces and spreads is bright and is expected to grow immensely in the coming years and GST looks promising to give this sector a further boost.
We would also like to thank the ministry of finance for acknowledging our representation and reducing GST rates on basic food ingredients like Mayonnaise, Sauces, Spreads, Salad Dressings and Peanut Butter in the last GST Council Meet. However, we strongly believe that all food products, condiments, accomplishments and ingredients should ideally fall under one umbrella and have a uniform GST rate as in many leading countries all over the world.”
Hemant Agarwal, Chairman and Managing Director, V-Bazaar Retail Pvt. Ltd.
“The new approach of the Government towards one tax which is GST is welcomed. According to me this step will be a great game changer for the Indian economy. Being a multi-brand value chain retailer I put my fingers crossed and looking forward to it. Manufacturers and traders would surely require some time to understand the process of GST and start taking benefits from it. It may increase the inflation in a shorter period but eventually there will be a decrease in inflation. Manufacturers and traders need to pass on the benefits of excise and various GST input credits. Business houses need to be more organised under the GST regime.”
Kamal Nandi, Business Head and EVP, Godrej Appliances
“We welcome GST as a reform for the industry. Home appliances have become a necessity now with evolving consumer lifestyle and a lower tax slab would have made appliances more affordable in a low penetrated market. With 28 per cent GST, we expect the consumer price (market operating price- MOP) of home appliances to marginally go up by 1-2 per cent post implementation of GST. This could have an impact on demand in the short run. However, normal monsoon, boosting agricultural economy and hike in allowances to government employees will propel demand during the forthcoming festive season.
Aji Nair, COO, F&B Division: Mirah Hospitality
“I have a mix opinion, GST as a concept is welcomed because it is consumer friendly and will help people understand tax and clear any ambiguity which was present earlier, on that front it is great. But the percentage currently given for F&B is not helpful to all restaurants. Especially with various models operating. There are restaurants with a pure veg concept and don’t serve alcohol like us who earlier fell in composite tax, also for the delivery model business, the tax is now greater which will also affect the sales overall. We welcome the move with an opinion that the percentage should be looked into and revised”
Yogesh Huja, Founder, Freedom.Desi
“There is no doubt that GST will have a positive impact on the country, its economy and the same applies to retail sector as well. In general, the retailers are likely to benefit as the prices for most of the things are likely to come down and they can expect an increase in the demand on account of lower prices. The shoppers in any case are the ultimate beneficiary of lower prices. Most importantly, GST will take a lot of hassle out of the tax collection system. So, GST is likely to be a boon for retail sector despite some teething problems one can expect.”
Kamal Gupta, Managing Director, Brand Folio LLC
“GST is a powerful tax reform that provides relief from the issue of multiple indirect taxes, simplifies inter state movement of goods and provides clarity and transparency to the system. Footwear below Rs 500 however will be taxed at 5 per cent while all others will be in the 18 per cent tax bracket. No tax system should be partial to cheaper products, rather a one tax for one commodity route should have been taken to promote consumers to opt for high quality products that bring value for money. Import of footwear under GST will also give a tough competition to local manufacturers. What stands to be seen is how well it is implemented. Rushing its application before the masses and businesses are properly informed will only delay its desired result.”
Saurabh Gadgil, Chairman & Managing Director, PNG Jewellers and Director, Indian Bullion Jewellers Association
“The declaration of GST for the Gems and jewellery sector at 3 per cent for gold articles and polished diamond and 0.25 per cent on rough diamond is very positive move by the Government. It will give a thumping boost to the organised players and organised trade, it is also a boon for the consumer, furthermore the Government will also benefit as more and more players will turn towards organised trade by complying to GST. Currently, we feel it is a win win for everyone.”
Sanjana Desai, Head Business Development, Desai Brothers Ltd – Food Division
“We anticipate the business to take a hit for the initial few months because of reduction in inventory. Volumes may be impacted for categories where taxes have been increased. Currently, the taxes levied are in the range of 6-8 per cent VAT plus 2 per cent excise. With the roll-out of GST, taxes applicable in most cases will be higher. An increase in taxes will directly impact business growth and profitability, especially for price-sensitive food categories. For example, pickles and fruit juices are product categories that see mass consumption and they will come under the 12 per cent tax bracket.”
“For the first few months it may be chaotic. However, subsequently it would start improving and positive growth should take place. Profitability depends on the manufacturer’s price structure. Normally, there should not be any increase, barring exceptions. However in the long run, prices would stabilize and may even reduce because of competition and input costs.”
“The introduction of GST will be a significant step toward indirect tax reforms in India. It will merge a large number of Central and State taxes (currently estimated at 25-30 per cent) into a single (reduced) tax under HSN Code and SA Code. It will help off set prior-stage taxes, will mitigate the ill effect of cascading taxes, and pave the way for a Common National Market. There will be revenue gain for Central and State Governments. But economic growth will initially go down as businesses will take time to adjust to the new order. However, growth is sure to pick up after an initial lag. So initially, the profitability of entrepreneurs will likely go down in some cases.”
Aji Nair, COO – F&B Division, Mirah Hospitality
“I have a mix opinion, GST as a concept is welcomed because it is consumer friendly and will help people understand tax and clear any ambiguity which was present earlier, on that front it is great. But the percentage currently given for F&B is not helpful to all restaurants. Especially with various models operating. There are restaurants with a pure veg concept and don’t serve alcohol like us who earlier fell in composite tax, also for the delivery model business, the tax is now greater which will also affect the sales overall. We welcome the move with an opinion that the percentage should be looked into and revised.”
Karan Tanna, Founder and CEO, Yellow Tie Hospitality
“GST for country is a good reform. It is not only a tax reform but a business reform in which non compliant companies will loose the game. However, Government should be considerate about small restaurant business and give them flexibility by introducing strict norms in a phase wise manner. Also , clauses like no rebate of tax on civil contracting etc. Is unfair as it increases capex by 18 per cent straight.”