Consumer goods costs may fall by up to 20% with GST introduction
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Packaged consumer goods prices are expected to fall by up to 20% with the advent of the goods and services tax (GST), retailers said, even as they attempt to protect their margins by engaging with manufacturers.
Members of the Retailers Association of India, including Future Retail, Walmart India, D-Mart, Hypercity and Reliance Retail on Tuesday met at the Mumbai office of Kishore Biyani’s Future Group. The meeting was held to discuss the implications of GST and decide on industry concerns to be brought before the government, the association’s CEO Kumar Rajagopalan said.
“The current tax rate is less than the weighted average tax rate we were paying earlier,” Jamshed Daboo, managing director of Trent Hypermarket Ltd, said. “Prices have to come down...Before the rates were out, I can understand there was speculation but now that they are out, it is quite evident where the prices will go up and where they will come down.”
“We are going to reduce our prices by 2% to 20%,” said Biyani, who owns Future Consumer Ltd. “That is the opportunity, to bring down prices for everyone,” he said, adding that overall, “the consumer’s basket of goods will become much more price-effective”.
Retailers’ biggest concern is to ensure that margins are not hurt as they reduce prices. Retailers said they were coordinating with packaged consumer goods makers independently.
“We deal with them individually but we all have a common objective—that whatever margin we used to get should be protected (as prices come down),” Biyani said.
The retailers’ body is also taking three key concerns to the government, relating to display of GST rates on goods, home delivery charges, and GST on packaged staples.
“When you see a Rs20 Coke bottle and with a 40% tax rate, the consumer may feel that Rs8 in taxes is too much,” Biyani said.
Second, retailers want home delivery charges to be levied as a flat service tax, instead of basing the tax on the highest rated item in the delivery basket.
Finally, the industry also wants branded packaged commodities, which will attract a GST of 5%, to be charged at the zero rate applicable to unbranded loose staples including rice, wheat and other cereals.