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GST impact: Titan expects revenue from watch sales to remain flat in Q1

LiveMint logoLiveMint 04-07-2017 Deepti Govind

Bengaluru: Titan Company Ltd on Tuesday said that top-line growth in its watches division in the April-June quarter will remain flat as the company postponed some customer promotions due to the 1 July implementation of the goods and service tax (GST).

The watch and accessories maker said in a BSE filing that it postponed promotions under its youth-oriented Fastrack brand and the wider Titan brand as the impact from higher tax rates on the division under the GST is still uncertain.

Watches fall under the 28% tax slab under the GST, and that means an increase in the effective tax rate that Titan’s watch division will have to bear. Still, the firm does not expect increase in prices since it can claim input credit under the GST and offset the tax rise.

“At 28% India has one of the highest tax rates for watches in the world, consequently increasing the risk of smuggling of watches into the country. We expect clarity on refunds of GST in tax-free designated areas very soon,” the company said in the filing.

Overall, the current financial year started off on a good note for most product categories led by the jewellery division, the company said. The jewellery division, which retails under the Tanishq brand, typically contributes the majority of the firm’s total revenue.

Jewellery division sales during Akshaya Tritiya rose 50% when compared with the same festive period in 2016. A successful gold exchange programme in June helped and resulted in exceptional top-line growth for the business, Titan said. But a strike by jewellers in the same quarter last year meant the strong growth also came off a lower base.

Jewellery has been slotted under the 3% GST slab and that should not lead to any disruptions in either sales or exchange of gold, according to the company.

But a higher tax rate of 28% on sunglasses was a drag on Titan’s eyewear business during the quarter. Prices of sunglasses could increase in the near future because of this but there won’t be any hikes in the cost of regular spectacles, the company said.

Titan expects the GST era to benefit organised companies like itself and added that it has assured its channel and franchisee partners of compensation towards any losses incurred due to the change in tax rates. That assurance helped it limit the loss of sales due to down-stocking to a negligible amount, it added.

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