The implementation of goods and service tax (GST) could possibly increase overall benefits for retailers by up to 5 per cent over the next three years, according to the Retailers Association of India (RAI).
“GST could increase the overall cost benefit of retailers by up to 5 per cent over three years,” Kumar Rajagopalan, chief executive officer of RAI, said.
It is expected that supply chain efficiencies may drive in benefits to retailers, as they may not need to keep stocks in various places bringing down wastage, he said.
“Transition to GST for us has been good. We have held workshops to create awareness among suppliers and manufacturers. We didn’t have any disturbances with our business continuity,” S Kannan, chief financial officer of Arvind Lifestyle Brands, said.
He, however, indicated that as far as compliance goes, it was not up to the mark, which he said was not unexpected.
“Compliance with regards to filing of returns and documentation, there is up to 90 per cent compliance, though not up to the mark,” he pointed out.
Kannan said retailers can avail of input credits with the effective GST tax rate that factors in all benefits. There is up to 25 per cent increase in logistics and delivery lead time.
“Over a period of time, factoring in input tax credit there could be a 1-2 per cent benefit to the cost base,” he indicated.
Retailers can get input credit for various expenditures they were incurring so far. Earlier, things like service tax on rental, man power supplies house keeping, among others, could not get a set off. Now, with input tax credit, this could help increase sales and margins, said Arvind Vats of Spencer Retail.
“GST will being good cost savings impact to retail companies. Through input tax credit alone there could be 100- 200 basis points benefit for retail companies over the next year or so,” Vats pointed out.
Retailers expressed other concerns like the transition period of six months to offload stocks, which they said, may not be enough for some sectors like jewellery and furniture.