For the consumer durables industry, the transition to the GST regime was not exactly smooth. The industry grappled with issues such as de-stocking by dealers and disruptions in primary sales. But the industry is now betting big on the festival season, which traditionally contributes 50-60 percent of its annual sales.
Kapil Agarwal, VP- Marketing, Whirlpool of India, said, “From the standpoint of the transition to GST, the industry did see some disruptions as there was de-stocking by dealers during the pre-GST period.
But inventories with dealers and distributors have now been restored to their original levels. The industry is now looking forward to a strong growth period during the festival season.”
In the last few days ahead of the GST rollout, retailers looking to clear their inventories gave out huge discounts, which led to a sharp spike in secondary sales. But primary sales took a battering as dealers and distributors did not pick up fresh stocks from manufacturers during the transition period.
Jayesh Parekh, Business Head, Consumer Durables, Intex Technologies, said, “In June 2017, sales of consumer durables shot up significantly due to uncertainty among consumers about price revisions post-GST. This meant that all the surplus stock was cleared before July 1, which added a chunk of profits to retailers. Following the rollout of GST, sales of consumer durables fell in comparison. Now, the market sentiment is expected to be buoyant again with the start of the festival season.”
However, there are others who believe that challenges remain, especially as retailers in smaller town and cities are still grappling with various nuances of GST compliance, the compulsions of upgrading their systems, and transitional credit claims.
Consumer durables veteran CM Singh said, “The transition in bigger cities and metros may have happened smoothly. But there are still a large number of retailers in Tier-II and Tier-III cities who are facing uncertainty or lack of clarity regarding GST.”
Another senior executive said that distributors and dealers have to contend with constraints on capital or cash that is locked in as they wait to receive their claims in respect of their transition stocks. He said this may have some impact on the propensity of smaller dealers and distributors to stock up on inventory in the short term.
The industry has been arguing that appliances such as washing machines, TVs, refrigerators among others should be kept in the 18 percent tax slab in the GST regime since they are no longer considered items of luxury.
Kamal Nandi, EVP and Business Head, Godrej Appliances said, “Home appliances have become a necessity and are no longer a luxury. We believe that in a market like India, which is a low-penetrated market, slotting appliances under the 18 percent tax slab will make them more affordable. We have been giving this feedback to the government.”
All eyes are now on the festival season period. Talking about the industry’s expectations from the season, Nandi said, “This year we have experienced a normal monsoon, boosting agricultural output, which will propel demand in rural areas. Additionally, the Center’s announcement of a hike in HRA under the 7th Pay Commission will increase disposable income in the hands of Central government employees, which too should translate into a surge in demand.” Agarwal added that the company expects Diwali sales this year to be better than in the last year, with double-digit growth in sales.
Most players are aiming to increase sales by 15-20 percent in the festival season this year as compared to 2016.
Manufacturers of consumer durables in turn believe that the uniform tax structure will help in making the supply chains more organized and transparent. – The Hindu Business Line