After GST overhaul, retailers point to logistical challenges

MUMBAI: Even as GST revamp will spur consumption, for companies, it also means some immediate onground challenges which they will have to tackle amid the festive rush.Whether prices of products go up or decline under the rejigged tax slabs, restickering/retagging of prices will need to be done.

For consumer goods which have a shorter shelf life of not more than 15-20 days, it will not be much of a problem.

Manufacturers, however, will have to compensate their retail partners for the differential in product pricing post tax rate adjustments (those that will be priced lower).For fashion retailers, it will not be so smooth. “Retagging merchandise on the floor right in the middle of the festive season will be a tough task,” said Kumar Rajagopalan, CEO of Retailers Association of India (RAI).

The industry body has written to the department of legal metrology seeking a notification allowing retailers to update MRPs on unsold goods manufactured, packed or imported before Sept 22. Under current norms (Legal Metrology Packaged Commodities Rules 2011), retailers cannot alter MRP post manufacture or import without formal approval.RAI has also sought permission to affix revised price labels reflecting GST changes, some time for transition to minimise disruption and assurance against penal action for compliant updates.

Stock currently held with retailers and distributors at old MRPs will need to be repriced which does present logistical challenges, said Gunjan Shah, MD & CEO at Bata India. “We are addressing this through clear in-store communication and focused training of our staff so that the transition is smooth for both teams and shoppers. Bata is committed to rolling out the new pricing by Sept 22,” Shah said.Manish Bandlish, MD of Mother Dairy said there could be some challenges with finished goods in the pipeline (which will have old pricing) with various stakeholders.

“Companies will have to take a call on either compensating some of the (trade) channel partners (retailers) or sell it off beforehand. We will have to evaluate,” Bandlish said. “For FMCG, shelf life for products is largely short. So, we hope there won’t be a very big impact,” Bandlish said.During the interim period till Sept 22 when the new regime will come into effect, there is also a possibility of slow off-take from manufacturers due to concerns around accumulation of input tax credit (ITC) on inventories, said Angshu Mallick, MD & CEO at AWL Agri Business (formerly known as Adani Wilmar).