GST has hit Diwali gift purchases, say sellers

The GST rates for gift items are 0 per cent for clay products, 5 per cent for ceramic products, 12 per cent for paper based products, 18 per cent for pens, envelopes, etc and 28 per cent for base metal and imported items.

Written by Mugdha Kinjawadekar , Shriya Nair | Mumbai | Updated: October 13, 2017 10:55 am
 GST, Diwali GST, Diwali gift purchases, GST impact on Diwali, Diwali celebrations, Mumbai news, Indian Express New Delhi: People buying fire-crackers near Jama Masjid in old Delhi on Monday. The Supreme Court has banned the sale of firecrackers in Delhi till November 1. PTI Photo by Vijay Verma (STORY DEL42)(PTI10_9_2017_000200B)

Days ahead of Diwali every year, service providers for gift-wrapping and packaging of gift hampers get busy and so do sellers of various gift items. This year, however, many of them are bracing themselves for a tepid Diwali as, they say, they have been feeling the pinch after consumer behaviour, following the implementation of the Goods and Services Tax (GST) in July, has changed.

Ruksana Mamoo, the owner of Andheri-based Lalapalooza, said: “Because of the overall slowdown of economy, the demand among individual consumers seems to have dipped and the budget seems to have shrunk too. Although material cost at source has become slightly cheaper, the GST on the end product seems to put off some consumers. But the reduction in the orders placed by corporates is definitely palpable”.

Shreya Ahuja, the owner of Wrap a Smile Studio in Santacruz said: “Corporates usually buy gifts in different ranges for different employees. This year, they have reduced both the size and the monetary value of gifts. The GST must have changed their budget calculations.”

The shops at Crawford Market are also facing a hit, that some say, is a result of GST.

Sales in some shops, sellers claim, have been halved. Crawford Market being a wholesale market has a lot of gift shops that sell toys, mugs, greeting cards, clay lamps, lanterns, mementos, statues and photo frames that are in great demand during the festive season. The GST rates for gift items are 0 per cent for clay products, 5 per cent for ceramic products, 12 per cent for paper based products, 18 per cent for pens, envelopes, etc and 28 per cent for base metal and imported items.

Viren Shah, the president of the Federation of Retail Traders’ Welfare Association (FRTWA), thinks the retail sale of gifts this Diwali has been a “flop show”. He said: “Most gift hampers are under the 18 or 28 per cent GST slabs, which make them too expensive. As a result, business has gone down by over 50 per cent this year”.

Thirty-five-year-old Sadam, a gift item seller, said: “The GST has hampered our sales by 50 per cent. This, despite being a festive season, there is no improvement in sales.”

Sharing the sentiment Hashim Mirza (47), who sells lanterns, lamps, cards and LED lights among other things, said: “The sales compared to last year have worsened.” Mohammad Arif (62), another seller of gift articles, said: “I have been running a shop for almost 10 years now. The sale till last year was very good. Now, the sales have dropped by nearly half.” Expenditure over Rs 50,000 on gifts and perks may attract GST for a company. However, companies may be able to claim input-tax credit on such transactions, for which they need the GST number of the gift packaging businesses they deal with. As a result, the corporate clientele of small-scale gift-wrapping studios has seen a significant dip. Shilpa Shah, the owner of Sanskruti Arts and Crafts in Mahim, said: “Since I do not have a turnover of Rs 20 lakhs, I am not eligible to apply for a GST number. As a result, I have no corporate orders this year.” Shah had received orders of hampers ranging from Rs 500 to 1,000 from three corporates last year. But she is now selling only to individual customers.

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