Representational image for shopping. Getty ImagesThe few days until July 1 when the much discussed Good and Services Tax finally rolls out in India in fact belong to the consumers.
The market offers a variety of discounts on products; and the reduction sale is really picking up everywhere from online shopping sites to the ordinary super markets in small towns and villages. The merchants are keen to clear the stocks before GST is launched and they look forward to this new system of taxation.
Once the GST comes into effect the price of some products might go down while some others’ might shoot up. It is impossible to sell the same product in two different rates; so the only practical solution is to clear the stock before July 1. The fast-moving consumer goods (FMCG) companies which sell products like soaps, talcum powder and beauty products offer a fair amount of profit for the merchants to encourage the sale.
Companies like Wipro, Hindustan Unilever and Dabur are giving good offers to their retailers to sell off their products. The prices of many FMCG products may drop from two to six percentage. The GST council has already decided the tax of products like hair oil, soap and tooth paste as 18 percent, which currently is 22-24 percent.
Automobile industry
The biggest pre GST sale is taking place in the automobile industry. The companies are not directly giving any offer but are encouraging sale by granting many concessions to the dealers. Maruti, the biggest car manufacturers in India, is offering discounts of Rs 2500-3500; and Mahindra is giving a Rs 27,000 discount for their Scorpio and Rs 90,000 for XUV500.
All these offers stand until 30 June and the companies are conducting the ‘big sales’ to attract the customers who might wait for the GST to roll out hoping that the prices might go down. The German manufacturer of the luxury brand Audi has announced a discount of up to Rs 10 lakh for its Indian models. A discount of up to 12 percent in the ex-showroom price is offered by Audi.
Benz reduced around Rs 7 lakh for their cars manufactured in India. The two wheeler industry has also joined the bandwagon and companies like Royal Enfield and Bajaj has also announced many discounts and offers.
In the apparel industry brands like Woodlands give 40 percent off for some products while Levi is giving away one free with every purchase in many cities. Foot ware companies like Reebok and Bata offer up to 50 percent discount for their products.
Reasons are many
There are several reasons behind the current clearance sale mania such as the difference in prices, the apprehension that the government might enforce the law strictly, and to avoid confusion regarding the new tax. For instance, as far as the luxury automobiles are concerned, their price is likely to go down after the GST launch. Still they are very keen to clear their stock because the price after July 1 will be less than what they sell currently even after giving all sorts of discounts and offers.
For the luxury vehicles the price will be 1.5 – 4.5 percent less than the current rate, even if 28 percent GST and 15 percent Cess are charged. For a car which currently costs Rs 50 lakh, the price might go down from Rs 75,000 to Rs 2.25 lakh. The companies and dealers are afraid that they might get caught if they sell the old stock for the pre GST price. Denying the profit of GST to the consumer might invite a heavy fine or cancellation of license; so the only way to avoid this is to have a mega clearance sale.
There is a confusion regarding the pre GST stock and this obviously is one of the major reasons for the present clearance sale frenzy. There are many facets to this issue like whether the trader has registered GST or the level at which a merchant deals with a product. Though it is said that the loss in profit could be met by the input tax credit, this could involve a lot of procedures. Most of the retailers think that it is better to start anew along with the introduction of GST in the country.
