HYDERABAD: Considering the slump in collection of commercial taxes post demonetisation, which surely is improving with subsequent improvement in cash flow since January this year, the worst affected commodities appear to be cosmetics.
Tax collected from aerated water, bottled water and also confectionaries in January is still worse than that during November, when demonetisation was announced.
However, on the whole, tax collected through Fast Moving Consumer goods (FMCG) from Telangana shows signs of improvement but sales are yet to return to normal. Figures from Telangana state commercial tax department, by means of tax collected, shows improved consumer spending. Experts from the field say the industry is getting back on track and is keeping an eye on rural consumption backed by remonetisation efforts from the Reserve Bank of India (RBI).
Tax collected from sale of commodities such as food products, confectioneries, vegetable oils, soap, washing powder, aerated and bottled water saw a major slump in November and December.
The collection for the sector in January was marginally higher but still lower than the pre-note-ban period. For FMCG sector the commercial tax department collected `291.7 crore in November and `82.93 crore in collections in December. While tax collections improved for January by `43 crore.
“Post demonetisation there was a considerable drop in the taxes collected as there was significantly a huge volume drop in sales of goods under the FMCG category.
From what we could understand is that sales dropped as most of the FMCG at retail shops are priced between `100 and `500. The shortage of small change with consumers led to a spending squeeze,” said a senior official with the commercial tax department.
“To be honest, even December and January was good, but there were few sectors in which industries like Hindustan Unilever and others saw a decline because of demonetisation but the trend now is upwards,” said Ravindra Modi, president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI).
The economy is buoyant more or less, so there will be purchasing power with consumer and the industry is optimistic about the next few months withe notes back in market.
“There are other factors for FMCG right now that are conducive. Monsoon was good this year and we will also see a bumper crop which plays an important role in the consumption of goods in the rural areas. So, the demand is good from rural areas as they have more cash in hand,” he added.