For Sanjiv Mehra, a retailer in the Capital’s Khan Market, counted as among the most expensive high-street shopping hubs of the world, implementation of the goods and services tax (GST) is like a recap of what happened nearly 12 years ago when the value-added tax (VAT) was enforced.
“It is too premature to comment on the GST, but 12 years back we faced the same problems when the VAT was introduced. There are a lot many complexities in the GST and getting on-board initially is quite capital-intensive. Also, we are unsure about how we will get input tax credit on the old inventory,” Mehra, who is also president of the Khan Market Traders’ Association, said.
Clearing old stock
The first working day after the implementation of the GST saw lower customer footfalls than usual. For retailers, the biggest business was finding ways to clear old inventory.
“The government should tell us how we are going to get input tax credit on our existing stock. At present, we are paying from our pocket. We fear we will be hit by losses due to this,” said Brij Gopal Khosla, senior vice-president of the association.
It was a contrasting picture at Nehru Place, Asia’s largest computer hardware hub. Shoppers had turned up in large numbers but retailers were finding it hard to meet the demand due to dearth of inventory.
According to Himanshu Gupta, owner of an electronics retail outlet, SSDN Technologies, which deals in personal computers, the inventory level was extremely low. “Placing new orders is a problem, as manufacturers are unable to meet rising demand. While meeting the requirements under the GST is not an issue for them, most are not ready yet with the required level of stocks,” he said.
In Mumbai, customers unsure of the post-GST changes in prices took time to return to high streets and malls. Suresh J, managing director of Arvind Lifestyle Brands, which retails US Polo, GAP and so on, said walk-ins were lower even during the weekend.
Suresh said for the time being they were absorbing the increase in levies. “We are at a certain loss. For the time being, we are absorbing it. So, there is no change in prices. But going forward, there would be some changes,” he said. Earlier, in apparel, VAT and other levies would come to about 9.5 per cent of the sale price. In the GST, there is a levy of 12 per cent on merchandise above Rs 1,000 and five per cent on apparel below Rs 1,000. So, manufacturers will have to increase or reduce, depending on the categories they are in.
Myth and reality
Shoppers at South Mumbai’s shopping hub High Street Phoenix were much less in number too. Stores like Zara, Benetton, US Polo and Lifestyle looked much quieter than usual despite heavy discounts on offer. Customers are perhaps assuming a price hike post-GST and staying away.
On the very first business day after the GST roll-out, traders across segments had returned to business in Kolkata. Last Friday, around 100,000 traders in West Bengal had gone on a one-day strike against the GST roll-out.
While uncertainty over compliance norms continues to be a concern, traders are also faced with supply issue. A spice trader from the Tollygunge area said that supplies of select spices like mustard paste, poppy seeds and others were in short supply, while another shopowner from Behala complained about shortage of cigarette supplies from the distributor. A supply shortage, in effect, has led to an increase in prices for a number of daily use goods.
A retailer in Bengaluru said, “Even after demonetisation, things were slightly slow but it picked up later. We’re hoping for the same after the GST implementation. Hopefully, things will get sorted out in a while.” Another executive representing a prominent brand pointed out that the GST had no impact on their business because prices had not gone up. “It is just a fear psychosis which is gripping the distributors and shopowners which will last for a fortnight at best,” A R Kajaria, president of the Federation of West Bengal Trade Association, said.
The Confederation of All India Traders (CAIT) believes the roll-out of GST has been successful. “Traders across the country successfully generated GST invoices as prescribed under the GST Act & Rules. Moreover, footfall of consumers in commercial markets and shopping complexes remain as usual throughout the day. Interestingly, consumers were seen keenly enquiring about the method of GST being levied in the invoice,” Praveen Khandelwal, secretary general, CAIT, said. However, CAIT has urged both central and state governments to draw a plan to reach out to trade associations to sensitise traders about the GST fundamentals and compliance obligations under the new tax regime.