Are Retailers Ready For GST?

Rahul Choubey, a resident of Gurgaon bought seven pairs of jeans for Rs 5000 from the clothing brand Lee. He said, Diwali has come early and thanks to GST “all these jeans having MRP of Rs 2399 each; I got it for Rs 700.”

Lee is not the only brand bombarding consumers with discounts but all the leading brick and mortar stores are persuading customers to visit their stores with lucrative offers.

One of the sales people of the clothing brand Park Avenue said, “We need to clear our old stock before GST roll out, the discount period has come early this time.”

Retailers feel that the objective of one country one tax will create a smooth process in the business transmission but they are still in doubt about its execution.

Future Group’s retail arm Future Retail is looking to open more distribution centres that are closer to their stores. Currently, the group has distribution centres in Burdwan (West Bengal) and Nagpur (Maharashtra).

Talking to BW Businessworld, Rakesh Biyani, Joint Managing Director, Future Retail said, “We are as ready as most of the other people. We have upgraded our technology platforms, our supply chain is ready to do centralised distribution. 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.”

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.

Liberty Group CEO, Adesh Gupta is upbeat about the GST roll out. He feels that the new tax slab will not impact the shoe business because the roll out is happening during monsoon season. Which is normally an off season for the shoe business.

Riding on the back of their robust supply chain system, When asked, Gupta how GST ready is Liberty Group? he replied, “We are completely ready as we are SEP (Supplemental Environmental Projects) compliance at the retail point and supply chain at the back end. On both the ends, we have a seamless supply chain.”

Retailers from different sectors are preparing for the GST roll out. Consumer durable goods manufacturer 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.

French Clothing company Lacoste is in the process of implementing GST from July 1st. Lacoste deals in seven categories and happy with the tax slab till 12 and 18 per cent for apparel and footwear but the company also deals in accessories such as Perfumes, Sun Glasses.

Rajesh Jain, MD & CEO of Lacoste pointed out that 28% tax rate is slightly un- reasonable for the retail sector because these categories need more push. While he is pretty much ready for the new tax regime. Jain said, “We are in the process of being GST ready all the rules of GST is still not out, but as they are coming out we are preparing for it and definitely ready to implement it from 1st July.”

Reliance retail feels that GST will enable businesses to focus more on efficiency and build robust processes by the government and it will benefit millions of customers and vendor partners.

Reliance's vendor partners will issue and exchange electronic invoices, data and move towards the digital economy.

A spokesperson of Reliance Retail said, "Reliance Retail is fully geared up for GST. We are closely working with our vendors and service partners. We do not expect any significant impact on the business or operations in implementing the regime."

The traders believe that one-nation-one-Tax regime under GST would bring about enormous benefits and simplify the ways of doing business in the country. There is a sense that the benefits will flow to customers in the form of reduced MRPs once the manufacturers start benefiting from GST regime and tax credits are available to them.

Some keeping their fingers crossed rewards come with risk and leading players are a bit worried about the execution and keeping their fingers crossed for the best.