'The near term will be challenging, as most will struggle to adapt to the new regime.'
Illustration: Dominic Xavier/Rediff.com
Future Group CEO Kishore Biyani believes the goods and services tax has multiple implications for his sector.
While the near-term will be challenging, the long term will augur well for both the retail and consumer markets as ease of doing business improves, he tells Viveat Susan Pinto.
How prepared is your group for GST?
Nobody is fully prepared for the GST.
Everybody is learning along the way and so are we.
I believe there are multiple implications due to this tax reform.
The near term will be challenging, as most will struggle to adapt to the new regime.
In the long run, however, there are benefits; the biggest being the ease of doing business.
For retailers, benefits accrue at the front as well as back-end.
At the front-end, they will be able to set up more stores because execution challenges will reduce.
At the back-end, the logistics and warehousing issues will ease.
It will become more efficient because of the concept of a unified market.
Top retailers recently met to discuss some of the challenges the sector would face. What were these?
The discussion was about pricing and protection of margins.
Will margins get squeezed in the event if there are price hikes?
How are FMCGs dealing with this issue and what will be the impact on consumers and retailers due to this?
What is the extent of price hikes?
There was a need to come together and put our minds to these issues.
There are also some other teething problems that require attention such as including GST as a component in the product price, as opposed to raising a separate bill for it.
There are also discrepancies that could creep in due to the variable GST structure on products.
For instance, packaged commodities will be charged at five per cent, while those sold loosely will be exempt from GST.
How do we deal with this dynamic?
Future Group is also a manufacturer and distributor of consumer products through Future Consumer.
Do you propose to raise prices of your products once GST kicks in?
No, we do not.
Our plan is to reduce product prices by 2 to 22 per cent across categories.
This is because GST rates will be lower. This will be beneficial to consumers.
Will that give you greater scope to compete with e-tailers, whose biggest advantage is the lower price that they bring to the table?
I can only speak for myself. We will bring down prices across products, so I see this having a positive impact on business.
What is happening to that industry (e-tailing) is visible to all.
But I do think that everybody will do what is right for their respective businesses.
What are the investments you've made in your business to be GST-ready?
We are ready to file invoices based on the new structure on July 1. We had set up teams internally to help us make that shift.