BackConsumer goods firms take cue, to lower prices
Consumer goods firms take cue, to lower prices
PremiumCustomer delight: A consumer goods store in Noida. Samsung has reduced prices of LCD television set by 1-2% depending on model size and so has rival LG. Haier India and Godrej and Boyce also plan to c
New Delhi: Many consumer goods and services companies have announced or are considering price cuts to boost sales after the government reduced excise duty and service tax.
These include Samsung Electronics India Pvt. Ltd, LG Electronics India Ltd, Godrej and Boyce Manufacturing Co. Ltd, Haier Appliances (India) Pvt. Ltd and Dish TV India Ltd, among others.
Samsung has reduced prices of LCD television set by 1-2% depending on model size, which would mean savings of between Rs1,000 and Rs5,000. Its plasma screen TVs are now cheaper by Rs1,000-2,000 and prices of home appliances have been cut by 1-2%.
Samsung’s rival LG has also announced price cuts. “A 2% cut in excise translates into 1.5% reduction in the prices of (most categories of) television (sets). So we are passing on the total benefit in categories such as 29-inch TVs, entry level slim TVs and mid-level flat TVs," said Amitabh Tiwari, business head, LG. The reduction is between 3% and 4%, he said.
The Congress-led United Progressive Alliance government cut factory gate duties and service taxes on Tuesday in an effort to boost demand and revive growth in Asia’s third largest economy as it reels under the impact of the global economic crisis.
This included a 2 percentage point cut in median excise duty—or Central value-added tax—to 8% and a reduction in service tax rate by 2 percentage points to 10%.
Other consumer electronic companies such as Haier India and the appliances division of Godrej and Boyce are also looking at passing on the benefit of excise duty cuts to customers. “We will pass the resultant impact of about 1% to the consumers, but from when and on which products needs to be evaluated," said Pranay Dhabhai, director and chief operating officer, Haier India.
Godrej and Boyce said its price cuts would apply to only fresh stock. “The inventory lying with the company and the distributors will take about 15-30 days to clear up. The fresh stock is likely to become cheaper by about 1.5%," said George Menezes, chief operating officer, appliance division.
Direct-to-home services provider Dish TV, part of Subhash Chandra-promoted Essel Group, has announced a cut in the service tax charged to customers.
In a statement released Thursday, the company said it will charge 10.36% service tax on its monthly packages instead of 12.36%.
Some companies, however, have decided not to pass on the benefit to consumers for various reasons. Dish TV’s rival Tata Sky Ltd, a joint venture of the Tata Group and Rupert Murdoch-owned Star Group, said it will not reduce prices of its services.
“From Day One, Tata Sky has been offering all its packages inclusive of all taxes and does not charge these separately. Hence, there won’t be any implications on our pricing," said Vikram Kaushik, the company’s managing director and chief executive officer.
In a similar vein, Shantanu Das Gupta, vice-president marketing of appliances maker Whirlpool of India Ltd, said: “The government has taken a great step, but we are still working out the possible impact. However, since we had taken a price cut in January, there may not be any room for further cuts."
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