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Cost-Wary Firms won’t be Sticklers for Sticker Rule


Consumer cos say changing price labels on stock operational & logistical challenge
Consumer goods makers are unlikely to change prices of pre-GST stock by putting fresh stickers as mandated by the government because it will be costly and operationally challenging to pull back unsold stock. Fast-moving consumer goods (FMCG) firms have decided to keep prices intact for old stock even in cases where their tax incidence has increased under the goods and services tax regime and will change prices only for the new stock that will be manufactured henceforth.
For products where tax rates have been lowered and prices tracking down unsold stocks with distributors and retailers across India is impossible
need to be reduced, companies said they would rather release fresh stock with reduced MRPs than go through the hassle of relabelling old inventory. Large companies such as PepsiCo, Parle, Dabur, Britannia and Marico had started controlling inventory in May and June, so unsold stocks of most are in the range of 5-7%.
Consumer electronics companies, which mostly sell products at a discount to the labelled maximum retail price (MRP), are reducing discounts on the unsold inventory without tinkering with the MRP sticker to factor in the 2-2.5% price increase under GST.
The government on Tuesday allowed companies and retailers to sell pre-GST stock till September 30 on condition that they stamp revised prices on unsold goods.
“Every single pack will have to be stickered and retailers could take stickers off in case of price changes. For companies which have to change price on existing stocks, the process is going to be very tough,” biscuit giant Britannia’s managing director Varun Berry said. The maker of Tiger and Good Day biscuits does not intend to change stickers on exis- ting stock. Parle Products marketing head Mayank Shah said managing price tags across millions of packs “is not feasible” for most companies since it will be a long-drawn and cumbersome process. “While the government’s intention is right, implementing it is not viable.” White goods maker Godrej Appliances’ business head Kamal Nandi said there is room for reducing discounts since the consumer electronics industry sells on the concept of market operating price and not MRP. “The difference in tax incidence will be passed on to customers and discounts will come down. This will be a more viable way to go about it rather than relabelling products,” said Nandi. The business head of a leading Korean electronics goods maker said relabelling will lead to significant expenses, including the cost of advertising. Further, if even one batch is left out in the exercise, the company will be held liable. “It is impossible to pull back all products that are already with distributors or retailers and change their MRP label,” he said.
Videocon chief operating officer CM Singh said the company was issuing a new price list to its dealers that will reduce customer discounts and increase dealer prices.
Consumer electronics companies usually offer 10-15% discount on MRP on televisions, refrigerators, washing machines, microwave ovens, air-conditioners and small or kitchen appliances. This will come down by 2-2.5%, executives said, as the industry transits to a 28% tax bracket compared with the earlier tax incidence of around 26% (including all cesses). These companies have 25-30 days of old stock in warehouses or with distributors/retailers. Also, manufacturers will take 2-3 months to exhaust the raw material already in stock, which was purchased under the earlier tax regime. For FMCG companies, it’s been a mixed bag. GST has increased the tax incidence for skincare and ayurvedic products, detergents, beverages and lower-priced biscuits to 28%. But several products, including cookies, toothpastes, soaps and hair oils, will be taxed at 18% under the new tax regime compared with 22% earlier.
GST’s raised tax for skincare and ayurvedic products, detergents, beverages and cheap biscuits to 28%.
Economic Times New Delhi, 06th July 2017

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