V-mart praises GST for aiding its drive towards organised rural retail

By

Isabelle Crossley

Published
Jul 11, 2018

The value fashion, personal care, and other fast moving consumer goods (FMCG) retailer V-mart has profited from the introduction of the goods and services tax (GST) and its organisation of the rural retail market- just the place where V-mart is expanding.

“GST has been extremely good for the industry and especially for us,” V-mart’s CFO, Anand Agarwal, told ET Now. “We have seen a lot of benefits coming in from GST in terms of simplicity of implementation, terms of logistics as well as getting customers to like and come to organised retail. It has been a good journey and a game changer not only for us but for the entire nation.”

The implementation of the GST in July 2017, although heralded by V-mart, was received less well by smaller retailers. This is because the tax favours organised retailers who have the means already in place to deal with stricter tax implementation, often online. As the rural FMCG retail market in Tier 2, 3, and 4 locations is largely unorganised, a move towards organisation will greatly benefit businesses such as V-mart which are currently expanding there.  

The GST has a fixed tax rate of five percent for goods under Rs 1,000 ($14.50) and, as V-mart’s products are in the value section of the market, most fall below this rate which has reduced tax rates on some of its products. This has also benefitted the business, according to Agarwal.

V-mart announced last month that it will expand, with a focus on rural locations, to reach a store count of 400 over the next five years. Agarwal recently clarified that the main focus will be on Tier 4 locations as the business has experienced a positive response to the 22 Tier 4 outlets it has opened in the past year. V-mart’s Tier 4 retail expansion, facilitated in part by the GST, will contribute a lot to the organisation of the rural FMCG market.