GST WATCH. Domestic consumer durable players absorb GST impact

Domestic consumer durable players are holding on to their prices despite a GST of 28 per cent unlike their MNC counterparts who have already hiked prices by two per cent.

Godrej Appliances, Videocon, Onida and Blue Star claim that they have kept their prices intact for air-conditioners, washing machines, refrigerators and microwaves by either giving less discounts, trimming dealers margins or just the fact that input credit would be enough for them to absorb the higher GST at 28 per cent.

Kamal Nandi, Business Head, Godrej Appliances, said, “We are not planning to change the MRP post GST as the re-labelling exercise is going to lead to a logistical nightmare. We were supposed to increase prices by two per cent after GST at 28 per cent but have now decided to reduce discounts to the consumer by two per cent. Since appliances are bought by the dealers at a discount of 8-10 per cent, this would go down to 5-7 per cent, with a two per cent reduction in discounts for large appliances.’’

Others like Mirc Electronics, Blue Star and Videocon are also intent on keeping prices neutral for the time being.

Unless the cost of raw materials is increased, consumer durable players claims that input tax credit will be a buffer to their cost of operations.

“We are expected to get an input tax credit between 1.5 and 1.7 per cent and unless the raw material for finished goods increases, we can absorb the GST rates,’’ added Nandi.

Others like Mirc Electronics, the makers of Onida televisions, are also holding on to prices. “We are not raising prices since we are getting input credit, making its neutral in terms of any price impact,’’ said Gulu Mirchandani, CMD, Mirc Electronics.

Videocon Industries is also trying to insulate its consumers from an immediate price hike. “At our level, we are trying to control the pricing till such time the old stocks are available with us. Dealers have been trying to clear the stocks through secondary sales in June. There are going to be multiple layers of taxes with GST but we will take a 2-3 per cent increase only when we have cleared all the old stocks, says CM Singh, COO of Videocon Industries. However, MNCs like LG have readily passed on the GST impact with a two per cent price hike across all its product categories. “Having liquidated our stocks with our trade partners, we have kept our dealer margins intact and at the same time, increased prices by two per cent as the impact of the GST would be borne by the customer,’’ said Vijay Babu, Business Head, Air-conditioners, LG India.

Meanwhile, consumer durable retailers like Vijay Sales acknowledge that most of the brands are trying to keep their prices intact. “Before GST, durable brands did drop their prices to liquidate stocks but most are now trying to absorb the GST rates since they have been compensated with the abolishing of octroi duties in states like Maharashtra which has benefited companies like Videocon and Godrej,’’ said Nilesh Gupta, Managing Partner, Vijay Sales.