Tensions amid transition
Amid the ongoing GST 2.0 transition, distributors and retailers have begun demanding credit notes, inventory adjustments, and price protection to safeguard themselves from potential losses arising from the new tax structure.
The industry is currently grappling with short-term trade disruptions, further exacerbated by a complex supply chain. Additionally, a significant volume of inventory still reflects MRPs based on the previous tax regime, which remains with distributors and retailers
Steps taken by distributors
Until the new MRPs are clarified, distributors have reduced their inventory levels to 5–6 days and are holding back on purchasing new stock. Distributors estimate it will take around 45 days to clear old inventory and for companies to gain full clarity on the revised pricing structure.
The All India Consumer Products Distributors Federation (AICPDF) has urged FMCG companies to support distributors and retailers during this transition by adopting mechanisms such as inventory adjustments, price protection, and issuance of credit notes. The AICPDF President has also requested companies to provide clear communication on how they plan to handle leftover inventory currently held by distributors
Strategies adopted by big FMCG players
- Mayank Shah, Vice President at Parle, stated that the company will offer discounts or issue credit notes to its channel partners.
- The MD and CEO of AWL Agri Business Ltd. stated that the company is adopting a dual approach — reducing the MRP and simultaneously increasing the grammage of product packs.
Some companies are also considering certain other options like buy one get one and discounts to tackle the issue.
