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No VAT dampener on Chennai New Year sales
January, 02nd 2007
Retailers see 20-30 per cent growth in business


BRISK BUYING: Customers throng a showroom in Chennai for the New Year sale

Consumers in Chennai are given to ushering in the New Year with a new consumer durable or at least a new kitchen appliance. Though some major retailers in the city expected that implementation of VAT might be a dampener this year, consumers were not in a dither.

"This year we hope to post at least 20 to 25 per cent more sales. We do not see any confusion among consumers," says Mr B.A. Srinivasa, Vivek Ltd. Though some of the retail fraternity is mystified over the billing formalities, according to Mr Srinivasa, the Vivek group is 100 per cent VAT-ready.

"We worked for over a month to put in place all necessary formalities to ensure VAT compliance from day one."

Across outlets

Viveks, which pioneered the New Year sale concept almost three decades ago in Chennai, now has 54 outlets across three formats Premier, Viveks and Jainsons.

It conducts the New Year Sale in all its outlets spread across Tamil Nadu (46 branches) and Karnataka (eight branches in Bangalore). Generally, consumer electronics and durables retailers register over 60 per cent of their annual sales during the period beginning October to January, with the New Year Sale alone contributing more than half of it.

With manufacturers extending freebies during the Sale to promote their brands, banks and leading non-banking finance companies offering loans with simpler formalities and retailers taking a cut in their commission and passing it on to the end-consumer, the New Year Sale seems to gather more steam with every passing year.

Retailers also spend a substantial portion of their annual ad spend on the Sale. Mr S. Ravishankar, Director, Rathna Stores, another retail chain, endorsing Mr Srinivasa's view, says there seems to be absolutely no confusion among consumers.

"Our customers are very clear. Moreover, they are sentimental about their New Year purchase. So, even if there is any confusion at our end, we would like to ensure that it does not hamper the Sale," he says.

While Mr Ravishankar sees around 20 per cent growth in sales this season, Mr David Wilson, Managing Director, Chellamani & Co, puts it at 30 per cent. According to Mr Wilson, implementation of VAT would only encourage consumers to buy more as they are under the impression that prices may drop further.

Favouring consumers

Asked whether VAT would favour consumers as there is a drop in tax from around 20 per cent to 12.5 per cent for certain products, Mr Srinivasa of Vivek says, "Though it may mean a minor correction in favour of consumers, it will not be more than a per cent or two." He argues that since most States have embraced VAT months ago, product prices are already VAT-adjusted and it is unlikely that manufacturers will cut prices any more. Agreeing with his argument, Mr Wilson of Chellamani says, manufacturers will definitely absorb price benefits if any, as their input costs have only shot up in the last one year.

Mr Ravishankar too sees no more fall in prices as tax benefits have already been factored in as manufacturers cannot have different MRPs for different markets.

R. Ravikumar

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