GST impact: Customers enjoy upto 60% discount as retailers get busy clearing stocks

New Delhi: With less than 10 days to go for the biggest indirect tax reform to take effect, retailers are rushing to clear their stocks by offering huge discounts ranging from around 30 percent to 60 percent.

Retailers said the "clearance sale" was being undertaken to liquidate their old stocks since they were unlikely to get input credit on the products once the new Goods and Services (GST) regime kicks in. Also, GST rates, compared to the existing VAT, would be higher.

"Instead of paying that extra amount to the government, which is a loss, we have put up a sale to liquidate these stocks," Ashish Gupta, Managing Partner at Vijay Sales, told IANS.

Vijay Sales is an electronics goods retailer with many stores in the national capital.

"We are looking at July to be a lean month now. The migration to GST will be happening and because of the price increase, there will be a setback for at least some time to come," he added.

Players in the field of apparels are also following the same path.

"There are going to be different tax brackets. For apparels, it is five percent for products below Rs 999 and 12 percent above that range. We are working towards adjusting to the GST. It will be a teasing stage initially," said Farida Mahabat, Marketing Head of fashion retail store Splash India.

The GST Council has levied tax on textiles, such as yarn and fabric cotton at the lower slab of 5 percent, apparels up to Rs 1,000 per piece at 5 percent while costlier readymade garments would attract 12 percent rate.

"It will take around a month for everybody to actually understand how the GST system is going to work. Once things settle, we will get an idea of the price increase," she added.

According to Harkirat Singh, Managing Director of Woodland: "The percentage in our category has come as 18 percent, since our shoes are normally in the price range of Rs 2,000 and above. If we compare 18 percent to the taxation before, that is VAT (value added tax) -- which averages at about 12 percent all over the country -- the GST rate would be higher."

Woodland is offering discounts up to 40 percent. "But since the GST has other parts as well, where you get input credits, the difference won`t be too much. It might increase by approximately one percent or so, which will be absorbed by the company," Singh said.

The GST tax rate on footwear costing more than Rs 500 has been fixed by the council at 18 percent. At present, footwear less than Rs 500 is taxed at 9.5 percent.

Gupta added: "The prices of goods will increase because, first, the brands will increase their prices. Secondly, the discounts offered now will not be given at that time. So obviously, there is a huge rush of customers right now."

Singh, however, said there won`t be too much of a difference. "The prices are not really going to change. It`s only the customer`s perception that the prices will go up later," Singh asserted.