As the countdown to the rollout of Goods and Services Tax (GST) enters its last leg, discount sales on goods such as large electronic appliances, apparel, mobile accessories and footwear are picking pace across online platforms and traditional offline retail format stores.
Reason: retailers are staring at lower margins on certain products stocked before July 1, on which the net tax incidence is expected to be higher, alongside concerns over paperwork involved with existing stock.
While white goods such as air-conditioners are available at discounts ranging between 10-40 per cent, some apparel companies are offering discounts as high as 50 per cent on their products, with flash sales offering retailers an opportunity to clear slow-moving inventory.
This week, online marketplace Paytm Mall announced a three-day Pre-GST Clearance Sale from June 13-15, in which over 6,000 retailers sold more than 500 brands. Also Read | Not a single state has told us we are not doing GST. They are all on board: Hasmukh Adhia
On the other hand, Bajaj Auto announced a reduction in prices of its motorcycles by up to Rs 4,500 to pass on the expected benefit of GST to customers. Taxes on motorcycles will reduce in most states from July 1, even as benefits for each state and across motorcycle models are different, Bajaj Auto said in a statement.
The company said it has decided to offer post-GST reduced prices to customers with effect from June 14. Currently, retailers and wholesalers, who have paid value added tax, are eligible for 100 per cent credit on VAT paid upon production of receipts for goods stocked. After July 1, on excise duty paid at the factory gates, the stockist would be eligible for 40 per cent deemed credit if the product attracts GST of less than 18 per cent and a deemed credit of 60 per cent for products attracting GST over 18 per cent.
As a result, a product bought by a retailer or a stockist under the current tax regime consists of excise duty, which varies from item to item, and will see a higher net tax incidence as the credit on excise is limited to a maximum of 60 per cent.
Furthermore, dealers are worried that tax authorities might question the documents produced by them to avail credit on the transition stock, and are therefore looking to clear stock.
“This pre-GST Sale will see customers buy items including televisions, consumer durables, premium laptops and DSLRs at up to Rs 20,000 cashback, while products such as Bluetooth speakers, footwear and accessories will be sold at up to 50 per cent off plus 25 per cent cashback. This sale has come at an opportune time for offline retailers who are looking to offload their entire inventory before the new tax rates become effective,” Paytm Mall said, justifying the sale.
White goods such as air-conditioners, washing machines and refrigerators fall under the 28 per cent GST bracket, against the current incidence of 21-23 per cent, inclusive of VAT and excise duty.
A manager at a West Delhi-based electronics appliance store, with three branches in the Capital, said that the store was offering between 10-40 per cent discount on air-conditioners.
“Summers are the peak time when people purchase air-conditioners and refrigerators. But even if two stores offer deep discounts at this time, we also have to, otherwise we end up losing customers,” he said.
The manager said that one of the concerns shop owners might face was maintaining and producing all tax receipts for claiming credit. “It might be much easier for some retailers to clear their stocks instead of going through the hassle of filing claims for tax credit,” he said.
An employee at the Ahmedabad-based factory outlet of Pepe Jeans said that discounts on apparel were hiked to 50 per cent, from 40 per cent, for this week.
However, another Ahmedabad-based apparel brand ‘Bandhej’ said that it has not planned any ‘pre-GST’ run-up sale. “Most retail players always have inventory with them. However, numerous discounts and sales by many brands show desperation to sell or over-production leading to more stock to dispose. Our annual sales are slated in the months of July or September and March, and will be held on schedule,” the store said.
An online merchant, selling readymade garments through marketplaces such as Flipkart and Amazon, admitted that his business won’t witness much impact on account of GST, and that many of the merchants were simply looking to get rid of old stock.
Readymade garments priced up to Rs 1,000 have been put in the five per cent GST tax bracket, while those costing over Rs 1,000 are under the 12 per cent bracket. As of now, including VAT and excise duties, incidence on readymade garments hover around seven per cent, depending on the state.