There have been several side-effects because of GST implementation across India, which has been planned for July 1st rollout.
However, one side-effect which we failed to comprehend, but has become a reality now is phasing out the inventory, to avoid losses.
As per reports coming in, online vendors across India are trying to sell their unsold inventory as soon as possible, before GST rollout. As per some estimations, products worth Rs 20,000 crore is being sold at dirt cheap prices on popular ecommerce portals like Flipkart and Amazon.
Certainly, this is music to the ears of hardcore e-commerce shopper.
The Logic Of Discounts On Ecommerce Portals
As per confirmed reports reaching us, WS Retail and Couldtail, which are the biggest retailers on Flipkart and Amazon respectively, have decided to clear their stocks, and empty their warehouses before July 1st.
This massive stock clearance exercise is being done to avoid losses being incurred after GST, as they will be required to pay additional tax on those sales.
As per market watchers, these heavy discounts, as large as 90%, will be especially witnessed for products belonging to niches such as Apparel, footwear, electronic accessories, mobile accessories, apart from premium watches, women handbag, leather products, health and beauty products.
In short, the products which are costing less than Rs 25,000 have the highest probability of being sold at discounted rate.
GST For Ecommerce Relaxed; Then Why Stock Clearance?
Recently, GST Council simplified and relaxed the rules meant for e-commerce portals.
For instance, online retailers can now avail 100% input tax credit against excise duty paid on those items, which are costing more than Rs 25,000 and have a serial number.
Besides, the limit for availing input tax credit has been raised to 60%, from 40% earlier.
However, the online vendors are stating that more than 70% of their inventory are those products, which costs less than Rs 25,000 and have no serial numbers. Hence, they will be required to pay double tax on these items, if they are sold after July 1st.
A seller from Bangalore said, “But there are many products in accessories like a mouse or a keyboard, a cover of a smartphone which do not bear a serial number and are valued less than Rs 25,000. I would not get any credit for these so I would like to sell off as much of the stock possible..”
As per tax experts, it makes more sense for the sellers to clear out their stock, rather than claim tax benefits after GST, after arranging all documents and determining that exact 60% of the stock, which is eligible for rebates under GST.
Another online seller from Jaipur said, “I would not get any input credit on the stock which is more than a year old so it is better that I slash the prices and incur a loss rather than incur a loss of 10-20%, post-July 1..”
Do let us know which products you will buy under this ‘enforced’ discount period on all e-commerce portals!
"Ecommerce Sellers Are Selling Rs 20,000 Crore Worth of Products At Dirt Cheap Price; GST Is The Reason!",