GST Rapping: Puma Apparel, Flying Machine

With only a few weeks left for the nation’s largest taxation reform, the Goods and Services tax (GST), to become usable, there’s been a mad rush among the retailers to clear off their outdated inventories prior to the new tax regime kicks in.

The newest to provide discounts ahead of GST launching are clothing and sportswear brand retailers, as they seem to clear off their merchandise amid worries that a tax would be applicable to products.

US-based sportswear manufacturer Puma is providing 10 percent discount over and above the 40 percent discount it’s currently offering at its stores. Clothing manufacturer Allen Solly is supplying a buy-one-get-one free scheme in its own sale for associates, whereas clients are being given two things free on cost of two by Levis. Additionally, clothing manufacturer Flying Machine is offering around 50 percent off and Pepe Jeans is operating a buy-three-get-three deal, stated a record  in The Economic Times.

Representational image. Reuters

The decision to provide hectic discounts on merchandise comes after the GST Council in its meet this month stated apparel with a price tag of over Rs 1,000 will be taxed against the levy of 7 percent as at 12 percent.

“The gap in the taxation is going to be a significant bang for your brand, thus we wish to keep the channel clean with reduced inventory dues. We are doing this to liquidate merchandise prior to the new designed program (GST) collapses in on July 1,” that the ET report uttered Kavindra Mishra, managing director of Pepe Jeans, like stating.

Another sportswear manufacturer Adidas stated the execution of GST next month starting has driven the company to improve its end-of-season selling in the 1 July-15 to 10 June-20 July period August period.

Not just shops, e-commerce important Flipkart has come using a sale as more than 50 manufacturers are offering discounts on its marketplace, while manufacturers such as Biba and W are providing around 30-50 percent reductions on its clothing manufacturers on Myntra.

Retailers offered reductions on appliances and electronic products. Retailers were offering discounts of up to 40 percent on different products and home appliances ahead of their GST rollout.

Consumer companies such as Samsung, Hitachi, Panasonic, Videocon, also, started as most of the retailers ceased taking orders that were fresh , giving customer offerings to clear their inventories.

“Retailers want to liquidate their whole stock as they cannot bear the load of the remaining 40 per cent central GST that will not be imputed to them on unsold inventory,” that the ETreport quoted Pulkit Baid, manager at Great Eastern, among the largest white goods retailers in the East, as saying.

Vijay Earnings, Nilesh Gupta, managing director, but said while the increase in tax credit limitation is good that is not enough to cover losses for retailers. “Hence, the liquidation of the inventory will last,” said BloombergQuint report.

However, distributors aren’t certain whether brands are going to be able to clear more than 40 percent of their inventory because of the GST element. Surprisingly, most manufacturers are offering steep reductions after excise credit was raised by the GST Council from 40 percent over the stock to 60 percent.

Manufacturers state that dealers are forcing them to provide discounts as they are worried about the cash flow difficulties.

The majority of the dealers aren’t certain whether the new transition rules will enable them to claim over 40-60 percent tax credit on excise duty paid by manufacturers in their own showrooms post 30 June, stated a report from  The Times of India.

New GST rules make it possible for dealers to maintain credit on things such as ACs, refrigerators, computers and phones that price over 25,000, however the grab is most of these things cost less than Rs 25,000 that the TOI report stated.

“Companies are doing inventory correction prior to the [GST] rollout. We saw this in May and it is being seen by us in June. We believe that in the days before the GST kick-off, we will see a lull that is whole as dealers will quit picking stocks up. But we hope to see a quick retrieval in July and we anticipate a massive spike in demand,” BusinessLinereport said quoting Ashok Goel, Vice-Chairman and Managing Director, Essel Propack, a major manufacturer of packaging material.

Published Date: Jun 15, 2017 03:00 pm | Updated Date: Jun 15, 2017 03:00 pm