Footwear, apparel retailers see little spark from GST cut

Early Diwali, weak discretionary spending, erratic weather led to a lacklustre festive season

- Vaishnavi Kasthuri [e-mail]

The long transition from the mid-August GST announcement to the September rollout caused delays as partners sought to avoid ITC mismatches. MINT

The goods and services tax cuts were expected to bolster consumption across sectors, but failed to spark the expected revival for India’s apparel and footwear retailers. An early Diwali, weak discretionary spending and erratic weather culminated in a lacklustre festive season for the two categories.

The uncertainty around rate rationalisation led to deferral in purchasing decisions, said Amit Aggarwal, CFO of Bata India Ltd, the country’s largest listed footwear retailer. “There was a delay in buying because of the planned rate rationalisation,” he said, adding that the transition window from mid-August announcement to the 22 September rollout was “very, very long”.

Many channel partners postponed purchases to avoid input tax credit (ITC) mismatches. “The moment the rates were announced, we saw a deferral in buying,” Aggarwal said. Bata responded by reducing prices and launching incentive schemes early. “We were the first movers... passing on the GST-related benefits effective the first week of September,” he added, despite the gross margin hit. Without the disruptions, Bata believes revenue would have been “at least flat”.