GST impact on companies: ITC hit by hiccups; know why

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Updated: July 29, 2017 5:46:21 AM

Cigarette-to-hotel-to-FMCG major ITC on Friday said there has been “some hiccups” in transition to the goods and services tax (GST) regime for the diversified conglomerate, but the disturbances have been far lower than what it had expected.

GST impact on companies, GST impact on ITC, ITC hit by GST, tax reform, FMCG, GST rollout, wholesale trade channels, YC Deveshwar, GST taxation rates, FMCG segment, GST on FMCG segmentAfter the company’s 106th Annual General Meeting, CEO Sanjiv Puri said, “GST is a transformative reforms, it is a huge tax reform. (Image: Reuters)

Cigarette-to-hotel-to-FMCG major ITC on Friday said there has been “some hiccups” in transition to the goods and services tax (GST) regime for the diversified conglomerate, but the disturbances have been far lower than what it had expected. After the company’s 106th Annual General Meeting, CEO Sanjiv Puri said, “GST is a transformative reforms, it is a huge tax reform. It will create a common Indian market. To expect that the transformative reforms will happen without any hiccup, I think we are expecting too much. So, yes there have been some hiccups in transition. But week by week it is getting better. We are surprised that the amount of disruption has been so little. It is much below what we had expected.”

Puri said after the GST rollout, wholesale trade channels of the company has been more affected than the retail trade channel. “The retail channel picked up faster, but the wholesale channel has been little slow to normalise. But it is getting better week by week. ..we have worked extensively with all our partners in preparation for GST. Most of our partners deal with that, in fact in day 1 (of GST launch) 99% of works were ready,” he averred.

During the AGM, some of the shareholders expressed concerns over the GST Council’s move to hike the compensation cess on cigarettes. Commenting on this, Puri said, “Yes, the continuing increase in taxation is a concern for the cigarette industry. Because in the last six years, taxes have gone up by 202%, and you have all been reading in the media also that there is a spurt in the availability of illicit cigarettes…as the prices are going up, it is giving rise to smuggling…this time there has been a heavy increase in taxation.”

Chairman YC Deveshwar said higher taxation on cigarette was putting pressure on legal cigarette industry in the country. “This is causing a rise in smuggling of foreign-brand cigarettes in India, and that is killing Indian brands.” According to ITC, legal cigarette industry remained under pressure due to further increase in excise duty in February 2017.

Revised rates of compensation cess announced by GST Council with effect from July 18 with the intent to correct anomaly in rates notified earlier has “resulted in sharp escalation of tax incidence on cigarettes” which is “not in line with the fundamental principle of maintaining revenue neutrality under the GST regime”. Deveshwar said under GST taxation rates on unbranded and branded products categories in FMCG segment like atta had led to creation of some ‘anomalies’.

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