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Soumik Dey
Soumik Dey

SALES RUSH

GST triggers off-season sale with massive discounts

gst-afp-2 (File) (Representational image) GST | AFP

With the new Goods and Services Tax (GST) to be implemented from July 1, at least three months before Diwali, it is sales season everywhere. Both online and brick-and-mortar stores are offering mouth-watering discounts, in a bid to start the new tax regime with a clean slate.

So, if you have been bitten by the shopping bug lately, you are not to be blamed. This year has been unusual in terms of the stock clearance sale offered by apparel retailers (usually sales offered in July to August), electronics stores and car retailers (sales offered in August and September).

If you are looking to buy a car, apparel or white goods (consumer durables like washing machine and refrigerator), now is the time. A range of deals—from freebies to price cuts—are available on goods ranging from four-wheelers to smartphones.

With prospects of some white goods becoming cheaper and some more expensive under the GST regime, retailers tussled to announce clearance sales for their stocks. Electronic brands like Samsung, Panasonic, Hitachi and Videocon announced promotional offers, gifts and extended warranties to boost their pre-GST clearance sales.

"The goods produced before GST came into effect should be sold before the tax regime is enforced. Otherwise, we stand the risk of sitting on unsold stock for tax adjustments later," said Manu Verma, head, indirect tax, at Samsung India.

Other than offering attractive discounts on its mobile phones and refrigerators, Samsung is offering free DTH package and other attractive warranty schemes to consumers. Many other companies, such as LG India, are also offering attractive EMI schemes on products to boost pre-GST sale.

"Some of our pre-GST stocks will still remain in the inventory and they will have to be sold at post-GST prices, even if at a loss. Right now, we aim to minimise this loss with the pre-GST stock clearance sale," said Verma of Samusng India, explaining the dynamics behind the odd sales season this year.

Even car makers are livid with the prospect of small and mid-range vehicles becoming more expensive after GST is implemented. Luxury vehicles, which will become cheaper in the GST regime, are offering huge discounts of upto Rs 7.5 lakh on a Rs 50 lakh car or SUV.

Two wheelers and mid-size cars will become more expensive after GST kicks in from July 1, as they are subjected to the highest tax rate of 28 per cent and a cess ranging from one to 15 per cent, depending on the size of the vehicle and its engine displacement capacity.

"We expect the price of vehicles to go down marginally post-GST, but that will depend on what happens to the cost structure of our equipment producers. If their cost goes up, then, despite a slight reduction in GST tax rates, car prices can still go up," said Vishnu Mathur, director general of Society of Indian Automobile Manufacturers (SIAM).

To iron out the issue of uncertainties in car prices, a number of car producers like Honda, Hyundai and Ford have promised to make good the difference in prices, after the tax regime change, to their dealers. "We are offering price protection to the customers for cars retailed between June 10 to June 30. This means that customers will buy the car at pre-GST price now. After its implementation, the difference in ex-showroom price and the current price now will be returned to the customer by the dealer," a Honda Cars India spokesperson said.

Ford India is offering discounts of up to Rs 30,000 on its compact SUV EcoSport, sedan Aspire and hatchback Figo to pass on the benefits of new tax rates under GST. Similarly, Japanese car manufacturer Nissan is offering Rs 25,000 to Rs 80,000 discount for its range of small cars and SUVs in this pre-GST sale season.

Indian car makers, Maruti Suzuki and Mahindra and Mahindra are offering discounts and benefits, between Rs 25,000 to Rs 75,000, for their entire range. Hyundai Motors is offering discounts in the range of Rs 45,000 to Rs 2.5 lakh for their entire range of small cars to premium SUVs, until June 30.

Bike manufacturers Bajaj and Honda have slashed prices of their two-wheelers by Rs 4,500 to Rs 7,500, from June 15 to June 30. "The sale will ensure that any immediate benefits visible to us and accruing out of GST are passed on to the consumers, to avoid complications later, under the anti-profiteering rule," said Rahul Bajaj, chairman, Bajaj Auto, speaking at a conference on GST in the capital last week.

"Currently, on stocks which are invoiced and delivered to the retailer, the VAT (Value Added Tax), excise and octroi (in some cases) are paid. The effective set-off would only be 60 per cent of the current price. Essentially, there is a loss post-GST on goods held earlier, and that is why retailers are trying to get the old stock out,” said Ritesh Ghosal, Chief Marketing Officer, Infiniti Retail, which owns Croma.

But Ghoshal believes that sales could be tepid immediately after GST comes into effect, in the months of July and August. "We are hoping that the situation will stabilise before Diwali," said Ghoshal.

Clearly, the wisdom seems to be in loosening the purse strings to take advantage of this one-time disruption than paying much more for your dream car or refrigerator, just a few days from now.

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Topics : #GST

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