It’s raining discounts on e-commerce sites, thanks to GST

Online shoppers have a special reason to rejoice, thanks to the Goods and Services Tax (GST) to be implemented on July 1. To ensure that their stock is cleared before the new tax regime comes into action, top players like Flipkart, Amazon and ShopClues are going all out on discounts – up to 80 percent – for the longest duration ever.

The GST imposition is expected to cause losses for the retailers as the tax margins are going to be substantially higher. For instance, according to the GST laws, garments that cost less than Rs 1,000 will have five percent tax, while those that cost more than Rs 1,000 will have 12 percent tax.

According to media reports, it is upon the request of their seller partners that the online marketplaces are hosting the sale so that they can empty the current inventory. Apparently, the sellers are cautious. Although the normal practice is to keep stock in bulk and then sell it according to orders, now they are placing orders with dealers only after receiving confirmations.

Retailers are allowed major tax credit under the new law – up to 60 percent input tax credit on items with 18-28 percent GST, and 100 percent for items, which cost Rs 25,000 and more. However, it will take a long time to adhere to the law’s processes completely, and these sellers will not be able to claim the tax credit on older stocks. Hence, it is essential for them to sell off the current stock even with huge discounts, as it will result in even bigger losses if sold after July 1.

Fashion, which usually provides maximum number of transactions, and furniture, which gives high margins are still the favourites for discount sales too. In fact, ‘Flipkart Fashion Days’ from June 10-18 has been claimed the first event of this scale and duration. It includes curated selection and steep discounts for top brands, as well as quiz and bidding contests to entice customers.

On the other hand, ShopClues, which focusses on Tier II and III cities is holding their ‘Triple Value Sale’ for two days – hoping to double the transactions compared to last month, when the sale brought in one lakh transactions in two days. Amazon – which has been pushing its fashion category for some time now – is giving 40-80 percent discount in Amazon Fashion exclusively on their app.

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