GST hits small businesses hard

Mumbai: The unorganised and local players in the Fast Moving Consumer Goods (FMCG) sector has ceded space to much larger organised players after the implementation of GST.

The pan-India trend, according to a study conducted by ICICI Securities, indicates that the organised sector is the key winner over unorganised players. 

With dominance of trade by large organised players, unorganised and small local or regional players are finding it difficult to cope with the current distribution infrastructure.

“The largest beneficiary of the trade disruption is organised packaged food segment. With contribution of unorganised players at 30-40 per cent in key food segments such as biscuits, chips, Indian namkeen, lack of preparation ahead of GST rollout is leading to swift loss in business for them. Food companies like Britannia and Nestle are gaining in the marketplace,” it said.

While wholesale trade witnessed a poor throughput in July, the activity in the subsequent month saw a pick up as GST officials clarified that distributors can raise both tax invoice and retail invoice. However, with the e-way bill (requiring any good more than Rs 50,000 in value to be pre-registered online before it can be moved) likely to come into force from October, 2017, analysts at ICICI Securities believe that the wholesale channel is not yet out of the woods and higher salience in wholesale channel may impact throughput even in Q3FY18.

FMCG companies have already started putting higher impetus on direct distribution with higher van operations. 

“We note that companies which prepared for GST rollout are doing better than others. The companies, which had schem-es in June 2017 are faring relatively poorly than co-mpanies with no schem-es. Hindustan Unilever has shifted all its wholesalers to tax invoice ahead of GST rollout and hence it is witnessing least pressure,” it said.