Consumer durable firms are seeking clarity from the government over the proposed GST reduction to 18% (from 28%) in air conditioners and flat-panel TVs above 32 inches, industry sources have told FE, ahead of the crucial festive period, which kicks in from next week with regional festivals.
Companies are said to be tapping industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA) for the same, aimed at helping them plan their festive season sale programmes over the next two months as fears of a likely postponement of sales grows if the GST cut goes through during the period. Consumers, said industry sources, anticipate a lag in GST cuts to be passed on to them in the above-mentioned segments, prompting industry fears of a postponement in sales till the lower-priced inventory lands in stores.
Festive season demand faces uncertainty
While categories such as washing machines, refrigerators, mobile phones and laptops may continue to be in the 18% tax bracket, some companies expect sluggish sales in these segments too as consumers wait for the likely revised pricing in ACs and large-screen television sets.
“There will likely be a slack in sales in air conditioners and flat-panel TVs above 32 inches because of the GST proposal to reduce rates in these segments from 28% now to 18%. But we hope to cover up in the future,” NS Satish, President, Haier Appliances India, said.
Regional festivals such as Ganesh Chaturthi will begin on August 27 in states such as Maharashtra, Goa and Karnataka, while Onam will be celebrated on September 5 in Kerala. The nine-day Navratri will begin on September 22 in the west, while the Durga Puja festival will begin on September 28 in the east, culminating in Dussehra on October 2, followed by the Diwali period in mid-October.
Firms in wait-and-watch mode
The festive period typically sees over a third of industry sales, prompting companies to roll out aggressive discount schemes, sale programmes as well as consumer and easy-finance offers to take advantage of the sentiment. This financial year has been challenging in the April-June period for cooling products owing to unseasonal rains during the period. Offtake for TVs and other electronic and home appliance items are typically strong during the festive period. But some companies anticipate some caution now owing to the GST overhang.
“Manufacturers will be in wait and watch mode to understand whether the GST rate reduction proposal does indeed go through,” Avneet Singh Marwah, CEO at Super Plastronics, a Noida-based consumer durables manufacturer, which has licenses for brands such as Thomson, Kodak, Blaupunkt, Westinghouse, and JVC in India, said.
Marwah also points to likely challenges in trade as they look to exhaust current inventory before ordering lower-priced products.