Meet­ing Ap­ple’s De­mands to be Tough Un­der GST: Ad­hia

Rev secy says coun­ter­vail­ing duty ex­emp­tions to go in new tax regime

The Economic Times - - Front Page - Deepshikha.Sikar­war @times­group.com

I don’t know what ex­actly is Ap­ple’s de­mand as DIPP is deal­ing with them. But we have lim­i­ta­tions on giv­ing ex­emp­tions un­der GST

New Delhi: In­dia may find it dif­fi­cult to ac­cept Ap­ple’s de­mand for a 15-year ex­emp­tion on coun­ter­vail­ing duty (CVD) on im­ported com­po­nents as the coun­try plans to roll out the goods and ser­vices tax (GST) in the com­ing fi­nan­cial year. “There is no way we can give in­di­vid­ual ex­emp­tions un­der GST regime,” rev­enue sec­re­tary Hasmukh Ad­hia told ET. “All of them (CVD ex­emp­tions) will go.”

What­ever the tax on lo­cal in­dus­try, the same will be­come IGST or in­te­grated GST that will be levied on in­ter-state trade, he pointed out. “Make in In­dia will get a big boost,” he said. “We ha-

HASMUKH AD­HIA Rev­enue Sec­re­tary

ve been un­fair to lo­cal in­dus­try. I don’t know what ex­actly is Ap­ple’s de­mand as DIPP (Depart­ment of In­dus­trial Pol­icy and Pro­mo­tion) is deal­ing with them. But we have lim­i­ta­tions on giv­ing ex­emp­tions un­der GST.”

Nor­mal mon­soons in the cur­rent sea­son sowed the seeds of de­mand resur­gence in the in­dus­try that re­ported as much as 10% growth in sales of hair oil, shampoo and tooth­pastes in Oc­to­ber, ac­cord­ing to sources cit­ing data from mar­ket-re­search com­pany Nielsen. “We were al­ready see­ing ev­ery ev­i­dence of de­mand pick-up pre-de­mon­eti­sa­tion and Oc­to­ber growth rates were well into dou­ble dig­its both for cat­e­gories as well as for our own busi­ness and they fell off very sharply in Novem­ber and De­cem­ber. For a strong re­vival, we will have to wait a lit­tle bit more, per­haps March or April,” said Su­nil Dug­gal, chief ex­ec­u­tive of­fi­cer at Dabur.

Af­ter in­creas­ing in Oc­to­ber, the trend changed later, with sales fall­ing by up to 7% in De­cem­ber, when the tem­po­rary im­pact of the gov­ern­ment ini­tia­tive to ex­change cur­rency notes of Rs 500 and Rs 1,000 be­came man­i­fest. The tran­si­tory loss in pur­chas­ing power caused con­sumer bell­wethers to re­port be­tween 1% and 9% falls in the De­cem­ber quar­ter sales, de­clines that might take about two or three months to re­verse as bills with­drawn in Novem­ber ac­counted for about 86% of the cur­rency value in cir­cu­la­tion. Ac­cord­ing to Nielsen data, the Rs 2.5-lakh-crore fast-mov­ing con­sumer goods in­dus­try could take a hit of about 1.5% in net sales, or about Rs 3,840 crore.

“In fact, Nielsen es­ti­mates that the ru­ral mar­ket over Oc­to­ber, Novem­ber and De­cem­ber was down by about 60%, which was quite a sur­pris­ingly high num­ber for us,” Unilever global CEO Paul Pol­man told an­a­lysts dur­ing the com­pany’s re­cent quar­terly call with in­vestors.

The liq­uid­ity crunch and low de­mand from re­tail­ers came at a time when some com­pa­nies were look­ing to en­hance their brand salience through en­hanced pro­mo­tions and ex­cit­ing of­fers. “The de­mon­eti­sa­tion in In­dia was in­deed un­ex­pected and that saw a high sin­gledigit or­ganic sales growth busi­ness be­come in the quar­ter a dou­ble-digit de­cline in or­ganic busi­ness. In In­dia, de­mon­eti­sa­tion cost us a swing from strong growth through Q3 to a de­cline in Q4,” Col­gate-Pal­mo­live global CEO Ian Cook said in an in­vestors’ call.

To counter the im­pact of the cur­rency swap, fi­nance min­is­ter Arun Jait­ley an­nounced sev­eral in­cen­tives built around farm in­fra­struc­ture and credit for the ru­ral and low-in­come con­sumers, mea­sures that could re­vive con­sump­tion. Go­drej Con­sumer Prod­ucts, whose prod­uct range in­cludes soaps and mos­quito re­pel­lants, said it had 11-12% sales growth in the ur­ban ar­eas in Oc­to­ber, with ru­ral sales ex­pand­ing faster. “The ex­pec­ta­tion was that in Novem­ber and De­cem­ber, we would have had a dou­ble-digit growth if the same rate were to con­tinue. Our be­lief is that FY17-18 should be a year of very strong re­cov­ery for FMCG,” said Vivek Gamb­hir, MD, Go­drej Con­sumer Prod­ucts.

ET AR­CHIVES

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