Amazon, Flipkart await GST clarity before finalizing festive sale plans
What's the story
India's top e-commerce players, including Amazon and Flipkart, are facing a tough choice ahead of their major festive sales. The dilemma is whether to stick to their original schedule or wait for the Goods and Services Tax (GST) Council's meeting on September 3-4. The potential revision of the 28% GST slab on high-value items like appliances and furniture could greatly impact consumer demand during this festive season.
Tax reform
Current GST structure and proposed changes
The current GST structure has four slabs: 5%, 12%, 18%, and 28%. The government has proposed a simpler two-rate system of 5% and 18%. This could greatly affect pricing for high-value products. Flipkart's Big Billion Days and Amazon's Great Indian Festival, which usually start in mid-September, contribute nearly a quarter of their annual revenues.
Clarity request
E-commerce platforms seek government intervention
To avoid disruption during the festive season, especially in high-value categories, some platforms are lobbying the government for more clarity.They want to know if these changes will be discussed at the upcoming Council meeting and how soon they will be implemented. A major e-commerce platform has been actively engaging with policymakers for early clarity on this matter, according to Moneycontrol.
Purchase delay
Consumer behavior and purchasing decisions affected
The uncertainty surrounding GST changes is also affecting consumer behavior. Shoppers, especially in high-value categories like appliances and furniture, are delaying their purchases. They are waiting for a possible GST cut that could make these items cheaper during the festive sales. This delay comes as consumer spending has been recovering since March after a weak first quarter.
Sale shift
Potential shift in flagship sales timing
Depending on the government's clarity and implementation speed, e-commerce companies may shift their flagship sales from the second week of September to the third. However, not all companies are pushing for intervention. Insiders at another major platform said they are taking a wait-and-watch approach after internal consumer surveys indicated that higher GST on large appliances would have a marginal impact.
Speculation warning
CBIC urges stakeholders to refrain from speculating
Amid the ongoing debate, the Central Board of Indirect Taxes and Customs (CBIC) has asked stakeholders not to speculate. The regulator said decisions on GST are taken collectively by the Council and warned that premature speculation could give rise to rumors and market volatility. Clarity on GST is particularly important as it could lead to a 27% increase in festive season sales by 2025 if provided in a timely manner.