Goods and Services Tax to power Indian brands and economy in the long run
India rolled out its historic Goods and Services Tax (GST) this week. Post-demonetisation, this is India's biggest step towards policy reforms. Brands are welcoming this landmark initiative as they predict rewards in the long run.
The four tax units; 5%, 12%, 18% and 28%, have replaced the complex local, national and state-level taxes which were responsible for confusion, systemic inefficiency and corruption.
The Drum spoke with Ashish Bhasin, chairman and CEO of South Asia at Dentsu Aegis Network, who said that there could be a temporary dip in company sales, but "it wouldn't really affect the actual consumer sales."
He further added, "As far as ad spend is concerned, things look positive in the long run. There could a slight dip for a few weeks, but nothing that should make us worry. Fast-moving consumer goods (FMCG) is going have a positive impact with the introduction of GST, and real estate may be impacted, also because of the onset of Real Estate (Regulation and Development) - (RERA).”
Speaking from a brand's perspective, Sukanya Duttaroy, managing director, Swarovski CGB, India, said the company welcomed the implementation of GST in India.
"We believe that it was the need of the day to bring transparency and compliance in business and will go a long way to create a level playing field pan India. It’s a very positive step and will greatly increase the confidence of international brands, for ease of doing business in India," said Duttaroy.
GST will further power the Indian economy as it has eased taxes on basic needs products.
Nidhish Moghe, controller of finance and admin at Bausch & Lomb, welcomed the concept of GST. He said: “The Contact Lens segment that we largely represent, is at a nascent stage with penetrations lower than 6-8% of the people requiring vision correction, compared to a >25% in most part of the world. The GST rates for Contact Lens and solutions are at 12% and 28% which are much higher compared to the current embedded tax rates, and will make these dearer to the end consumer."
Furthermore, GST is a treat for Apple gadget lovers as Apple iPhones, iPads, iMac, MacBook and other products got a major price cut, by almost 7.5%. It will be a good boost for Apple as it recorded strong double digit growth for its revenues in the second quarter this year in India.
The implementation of GST, however, will impact the sales of ecommerce businesses by at least 10-15 % for the first couple of months, as a result of price hikes on products and de-listing of non-GST compliant sellers. The returns and cancelation of orders on ecommerce websites will also be more complex.
The Drum spoke with ecommerce business Indiarush's CEO Rahi Jain, who said, “Without any doubt, GST will hit running ecommerce businesses to a great extent with its current 5% taxation rate on the textile sector. But the major impact will be on small-scale vendors and sellers, which might force them to retreat from the marketplace."