With the implementation of the Goods and Services Tax (GST) in India, the promising beverage company Big Cola at Norbugang, Samtse has been directly impacted by the GST rules. The company, popularly known in the domestic market as Big Cola is a Joint Venture that produces all beverage products under the brand ‘BIG’ owned by AJE. AJE is one of the largest multinational beverage companies, with operations in over 23 countries.
The Chief Executive Officer of the Ice Beverages Private Limited, Thuji Yonten said that the GST implementation has caused a big slump on their sales in India and severely dented the viability of their business.
“The main reasons behind this is due to huge increase in tax rate from 15% (VAT plus entry tax) in the earlier tax system to 40% Integrated Goods and Services Tax (IGST) (28% GST plus 12% Cess); and upfront levy of IGST on export value at the entry point as opposed to levy at the point of re-sale in India.
“To partially absorb the huge increase in tax liability, with no options left, we increased the MRP of our products, which only eroded our already thin margin, stifled sales, and severely impaired our business viability. In summary, the GST roll out has completely disrupted our business model,” said Thuji Yonten.
He mentioned that the front-loading of IGST has caused substantial fund blocks. This means that an Indian importer of Big Cola products would have to pay the entire IGST amount upfront. “It has completely tilted the playing field against our company as well as other export based Bhutanese industries and made it far more difficult and expensive to scale up our export businesses to India.”
Since the company’s export to the India constitutes almost 93 percent of their market, the company is exploring alternative measures at the moment to lower the impacts of GST by working on expanding and strengthening the portfolio of their products and constantly reviewing their business model.
“We have already increased our MRP after the GST rules and suffered major dips in sales. Ice Beverages has been envisioned and set up primarily as an export-oriented business with the goal to generate more than 97 percent sales from India, thereby contributing to INR inflow. We are working extremely hard and hope to succeed notwithstanding the mammoth challenges stacked up against us,” said the company’s CEO.
The company’s goal has been to rapidly scale up their business, thereby contributing to the Bhutanese employment market by employing more youths in the company. “Our target is to create 250 to 300 jobs for Bhutanese nationals. However, at this stage, until the GST-related challenges are fully addressed, our expansion plans would be delayed but we do not have any intention to downsize our current Human Resources strength with over hundred plus employees.”
Thuji Yonten said that the BIG products have been very well accepted in the domestic market, but justified that the domestic market is too small to sustain and grow their business. “Despite launching and selling a new brand in an ultra-competitive market like India, we achieved significant month-on-month sales growth until the roll out of GST.”
The concerned officials from the Bhutan Chamber of Commerce and Industries (BCCI) and the Department of Revenue and Customs said that they’ve already submitted the propositions on behalf of the private sectors to the Government of India and that they are yet to receive a response to resolve such issues through bilateral consultations.
“We have already apprised the government and we are hopeful that the Government would urgently find solutions to ease the GST burden on our company and others like us in the private sector,” said Thuji Yonten.