Retailers Prepare for Major GST Rate Cuts Effective September 22

As of September 22, 2023, India is set to implement significant cuts to the Goods and Services Tax (GST), prompting retailers, chemists, distributors, and auto dealers to prepare for a substantial price reset. In a recent ground check conducted on September 19, CNBC-TV18 found varying levels of readiness across different sectors as businesses scramble to update their systems, relabel products, and adjust distribution networks.

Consumers are anticipating lower prices on essential goods, ranging from everyday medicines and groceries to larger purchases such as automobiles. The government has mandated that retailers implement these revised prices immediately, but challenges on the ground suggest that the transition may not be entirely smooth.

Chemists Tackle Relabelling Challenges

Pharmacies face a significant hurdle in relabelling medicine packs and updating billing software. “We’ve received the revised lists from distributors, but updating software and relabelling medicine strips is tricky,” said Piyush Tyagi, owner of Healthcare Pharmacy in Delhi. He emphasized the urgency to provide clear and immediate price reductions to customers.

To expedite the relabelling process, the All India Organisation of Chemists and Druggists (AIOCD) has requested pharmaceutical companies to issue QR-code-based price lists. This initiative aims to help retailers verify new prices swiftly, avoiding delays associated with relabelled stock. However, smaller chemist shops and local grocery stores have been instructed to sell products at the new prices, even if the old maximum retail prices (MRPs) remain visible. This could lead to confusion for customers at billing counters during the initial phase of the change.

FMCG Distributors Prepare for Stock Transition

Distributors of fast-moving consumer goods (FMCG) are also adjusting their warehouses and supply chains in anticipation of the GST cuts. Pushpendra Pratap, owner of Aaradhya Enterprises, an FMCG distribution firm, noted that while companies are notifying them about new MRPs, it will take time for these changes to be fully reflected on store shelves. “Fresh stock will carry revised prices, but older goods already on shelves can’t be relabelled overnight. It will take some time for consumers to see the full impact,” Pratap explained.

Industry experts predict that the transition will unfold over several weeks, with new batches of products gradually replacing older stock.

Auto Dealers See Smoother Adjustments

The automotive sector appears to be managing the GST adjustments with greater ease. Carmakers have already published revised price lists, and dealers are prepared to issue invoices that align with the new tax regime. “Any car invoiced after September 22 will automatically reflect the revised GST,” stated Deepanshu Singh from Karma Hyundai. However, some dealers have expressed concerns about the implications of removing the compensation cess, particularly regarding tax credits on existing inventory, which could affect profit margins.

Despite the complexities involved in implementing these changes, analysts anticipate that consumers will benefit from immediate price reductions, especially in high-volume sectors like medicines, packaged foods, and automobiles. The scale of the GST rate cut is significant, marking it as one of the most notable tax resets in recent history.

As businesses push to update systems, clear out old stock, and relabel products, the real test will occur on September 22. Indian consumers will be eager to experience the first wave of lower prices at retail counters across the country.