MUMBAI | KOLKATA: Several foods and grocery chains, kirana shops and electronics retailers are struggling to stock even half their retail shelves because of issues arising out of the transition to the new Goods and Service Tax (GST) regime.
Deliveries have been impacted because of delays in system upgradation across the supply chain, reduction in primary sales by manufacturers in the last fortnight of June, and the time being taken for new stocks with fresh price tags to hit the market.
Normal service is expected to resume in the next two to three weeks. Kishore Biyani, chairman of India’s largest retailer, Future Group, said the ‘fill rate’ at an industry level would be about 55 per cent.
“The fill rate has been poor due to renegotiations with FMCG companies on pricing or margins and system upgradation by wholesalers and dealers. We are slightly better off since we ordered in excess last month,” he said, adding he expects stock level to be normal in another 2-3 weeks.
“It’s a short-term issue and will soon be normal. It takes a while for GST rates to be updated at the trade level,” said Neville Noronha, managing director of Avenue Supermart, the company that runs the DMart chain of stores.Vivek Gambhir, managing director of Godrej Consumer Products Ltd, said the problem was more in rural areas.
“The pace of re-stocking is a bit slower in the rural markets as these markets are more dependent on wholesalers and these partners are still adapting to the transition. However, we are hopeful that the overall situation should stabilise by the end of the month,” he said.
India moved towards a unified tax structure that replaced multiple state and central levies from July 1. While the rollout has largely been smooth, consumer goods makers, retailers and trade channels have experienced some disruption.
Most companies and distributors tried to empty their stocks by June 30 because of uncertainty over transition norms and new prices. This was particularly true of electronic goods retailers who offered huge discounts in June to liquidate their inventory and the manufacturers slowed down or halted their production.
The government in early July clarified that companies could sell their unsold stock for three more months by stamping revised prices. But most consumer goods companies felt this was not practical as it would mean pulling back inventory from distributors and retailers.
Consumer durable makers said they have started fresh production and billing to distributors and large chains and fresh stock should hit stores by next week.
“The transition took time. Business should stabilise over the next fortnight,” he said. Durable makers and distributors could only update their billing backend late last week due to some confusion overHSN codes of their products without which they could not complete the transition to GST billing.For instance, earlier the indoor and outdoor unit of a split air-conditioner were invoiced as single unit, but under GST both the units have separate HSN codes and hence billed separately.