Dealers Offer Big Discounts To Clear Stock Ahead Of GST

Many retail stores and e-tailers have announced big discounts on electronics, home appliances, clothes, footwear and other items ahead of the implementation of goods and services tax (GST) from July 1. Though such promotional offers are generally announced during the Diwali festive season, some retailers have announced discounts to clear inventories due to the cost and process associated with making old stocks compliant with the new indirect tax regime. The discounts come despite the GST Council increasing input tax credit to 60 per cent from 40 per cent on stocks lying unsold up to June 30.

Besides that, under the incoming GST tax structure, prices of some household consumer goods such as televisions, air conditioners and refrigerators may go up as they fall in the 28 per cent tax slab of 28 per cent. Higher prices could hurt demand initially after the GST rollout.

Meanwhile, leading retailers including Future Group, D-Mart and Aditya Birla Retail discussed in Mumbai on Tuesday issues related to GST, including pricing and margins. Over 12 top retailers met under the aegis of Retailers Association of India (RAI), which intends to approach the government on key areas like including GST as a component in the product price to avoid confusion, and clarification of taxation on packaged commodities.

"The dealers also have to do a compliance under GST transitional provisions for the stock left on 30th June for claiming credit of duties and taxes paid on stock as on that date. To some, this could be a tedious and time-consuming exercise, hence they are minimising the stock," said Sandeep Sehgal, director tax and regulatory at Ashok Maheshwary & Associates LLP.

The retailers also expressed concern about a 5 per cent tax levied on packaged goods that causes a discrepancy as loosely sold commodities are not taxed.

"Ideally, taxes should not cause price increase. They should not create variations that adversely affect consumers," Future Group CEO Kishore Biyani said.

Online retail giants Flipkart and Amazon have slashed prices in segments ranging from garments, home appliances, mobile accessories, watches, leather products and health and beauty products.

Paytm Mall, a unit of digital payments platform Paytm, has also launched a clearance sale, in which its merchants or authorised retailers are offering discounts and cashbacks on many items including TVs, laptops, phones, ACs and refrigerators. "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 said.

Meanwhile, the GST Council last week lowered tax rates for 66 items, placing products such as cutlery, pickles, ketchup, mustard sauce and toppings at a lower tax slab of 12 per cent compared with 18 per cent earlier.

(With inputs from PTI)

Disclosure: Paytm's parent company One97 is an investor in NDTV's Gadgets 360.