Consumer companies prepare for festive season amid GST concerns
Indians have paused big purchases in the hope that prices will drop after the goods and services tax slabs are merged. Still, consumer goods makers, electronics manufacturers and retailers press ahead with their preparations for a festive surge in demand.
Brands have ramped up promotional activity, are expanding reach, lining up deeper discounts and focusing on premium products in anticipation that discretionary consumption will surge during the period considered auspicious for buying smartphones and kitchen appliances to chocolates. Companies are betting that an early decision on merging GST slabs will further propel demand.
“The industry is hopeful that the new tax rates will be announced by September, which could trigger a rebound in demand,” said B. Thiagarajan, managing director at air conditioner maker Blue Star. “Despite the sluggish summer season that weakened sales of cooling products, he remains optimistic about closing the financial year with a 15-20% growth.
Prime Minister Narendra Modi on Independence Day announced GST reforms to provide relief to households. The government has proposed to retain two major GST rates, eliminating the 12% and 28% slabs. Most of the products and services currently in this category will be moved to 5% and 18%, reducing prices for consumers.
The GST Council, in its meeting scheduled for 3-4 September, is expected to decide on the proposed two-rate system
At present, consumer sales have largely stalled as buyers hold off in anticipation of upcoming GST revisions, Thiagarajan said, adding that only business-to-business transactions and purchases linked to home renovations are continuing. He said the market could see greater discounting and competitive intensity as more companies rush to liquidate stock.
