80% discounts continue as e-commerce unaffected despite GST rollout

While the expectant rollout of the Goods and services tax (GST) triggered a string of online sales across platforms and categories, its implementation on July 1 had set the scene for a decline in these offers. However, most popular e-commerce sites seem to be carrying on their sales.

With the price of some products expected to go up this month onward, vendors on e-commerce platforms like Flipkart, Amazon India and Paytm Mall swooped in to supplement the increased demand for items like hardware, large appliances and furniture. More importantly, non-GST compliant sellers – who are now reportedly delisted from these platforms – rushed in to sell off their wares, albeit at absurdly low price points.

What’s in store
Fashion – which enjoys a high volume of transactions on these portals – is still a favorite.

Flipkart – which recently launched its own private label for women and men, namely, Divastri and Metronaut – is still offering customers up to 70% discounts on fashion products, including bags and watches. Amazon India is also offering similar deals across brands including Adidas, Levi’s and UCB.

“Sellers on these marketplaces have a significant upside in volume of sales since they are able to reach customers across the country,” says Utkarsh Biradar, Senior VP – Products at Shopclues, which is offering sportswear at 80% cut. “We do not see any difference in taxes on goods sold online and offline even with GST and hence consumption or demand is unlikely to change,” he further adds.

Furniture, which is a high-margin category, is also flying off the shelves despite the rate of plywood – used in the manufacture of most wooden furniture articles – going up at 28% under GST. Pepperfry’s ongoing ‘Happy GST Sale’ is offering up to 55% off on most products, including beds, wardrobes and shoe racks. Flipkart is also offering up to 80% off on home and furnishing items.

Under GST, 1211 items have been categorised under various slabs. As per the rates announced under the new tax structure, customers have been expecting a surge in the prices of premium garments and mobile phones – both of which fall under the 12% slab. 28% tax on certain beauty and wellness products and large appliances have also had little effect on their online sales, which are still being offered up at dirt-cheap price points.

While Flipkart is offering up to 35% off on large appliances like washing machines and vacuum cleaners, perfumes and deodorants are selling at minimum 50% off on MRP. 18% tax on books and cameras also seemed to have created zero impact on sellers who are still offering great deals on Canon and Nikon cameras on Flipkart and offering up to 50% off on certain books on Amazon India.

Why sales make sense
Breaking down the brouhaha over the online sales in recent weeks, Senior Director at Deloitte India, MS Mani offers a simple explanation:

“What seems to have happened is that e-commerce sites have woken up to the fact that GST would bring uncertainty in the minds of customers on whether prices would go up or down,” he says.

“In this scenario, customers are buying products and e-commerce sites are simply tapping in on that sentiment. This has seen an uptick on sales and traders do not see any reason for those to go down, thereby continuing with their deals even after the implementation of GST,” he adds.

Mani also goes on to add that most e-commerce companies are already well organized and to them, GST will not cause a lot of disruption. “GST would not lead to any slowdown. It is not bad for either customers or sellers and will only make people work in an organized manner,” he feels.

Taxing legislation?
Although the launch of the new tax regime was driven by chaos and confusion, the country’s leading online retail players had made it strictly mandatory for merchants to register with their new Goods and Services Tax Identification Numbers (GSTIN) if they wanted to continue operating on their platforms. While some expected non-GST compliant vendors to fall off the e-commerce web with this move, others feel it is largely irrelevant.

“Majority of sellers on larger e-commerce were already compliant under the earlier legislation, while others obtained relevant permits in the last few weeks of June,” says Mani. “Some may be relatively affected for various reasons, but that proportion would be very small,” he added.

Concurs Shopclues’ Biradar: “Most of our top sellers are GST-compliant and the government has given an extension to smaller sellers to register themselves, hence we did not see any dip in our GMV post GST,” he says. “We have also taken several measures and initiatives to help our merchants become GST-compliant,” he adds.