Appliance Makers, Retailers Expect Sales Boost After GST Rate Cut
Home appliance makers and electronics retailers expect an extended boost in demand, first driven by a lower goods and services tax rate and followed by the festival season.
The immediate push is expected from a 10 percent drop in the tax rate. The GST Council lowered rate on a number of appliances, including washing machines, refrigerators and vacuum cleaners, to 18 percent from 28 percent. That comes about a couple of months before India’s festival season— considered auspicious to buy everything from gold, cars and appliances— kicks off in September end.
Companies will pass on the cut to consumers, Vijay Sales’ Managing Partner Nilesh Gupta told BloombergQuint. “The entire consumer durables bucket will see an 8-10 percent surge in sales over the next eight months. The industry will start advertising. Everyone will be in a gung-ho mood,” he said, adding that consumer sentiment will drive sales growth.
Agreed Atul Lall, managing director of contract manufacturer Dixon Technologies (India) Ltd. “All that (rate cut) is going to be passed on to our customers (manufacturers) who I feel, in turn, are going to pass it on to end consumers,” he told BloombergQuint. “I don’t see a margin expansion taking place, but it will be a significant volume booster.”
Shares of all but one constituent of the BSE Consumer Durables Index rose. Blue Start Ltd., Whirlpool of India Ltd., Symphony Ltd. and Voltas Ltd. closed 1.3 to 5.3 percent higher.
The run-up to the festive season is usually a quiet phase for appliance sales. Moreover, the last few quarters haven’t been that great, according to Godrej Appliances.
The consumer durables industry has been struggling for six quarters, growing in low single digit, said Kamal Nandi, business head and executive vice-president at Godrej Appliances. After the GST rate cut, the company will lower prices of its consumer durables by 7-8 percent, he said. “It will boost sentiment, especially during the festive season. We expect growth to be in double-digits this time,” Nandi said, aided by a normal monsoon.
The new GST rates on home appliances, applicable from July 27, is now on a par with that of several daily-use items.
Sunil D’Souza, managing director of Whirlpool of India Ltd., said items like refrigerators and washers are essentials and not luxuries. By lowering the tax rate on them, the government has used the benefits of GST to improve the lives of the Indian consumer, he said.