Walmart-owned Flipkart and Amazon have initiated talks with leading brands on ways to deal with the proposed Goods and Services Tax (GST) reduction. The e-commerce marketplaces believe lower taxes could dent demand in the transitory phase as consumers may wait for prices to fall, especially for high-value goods like electronics, industry executives said.
The marketplaces are particularly concerned about the impact on their upcoming flagship festive sales, their most crucial annual sales event. This sale usually happen ahead of Navratri festival by when the new GST rates are unlikely to come into effect, the executives said.
The GST Council is likely to meet in the third week of September to finalise the new GST rates and the date of implementation.
A Group of Ministers (GoM) on GST rate rationalisation Thursday approved the Centre's proposal to eliminate the 12% and 28% slabs, consolidating the GST structure into two rates—5% and 18%. A higher levy of 40% GST could be levied on sin products like alcohol, tobacco, and some luxury goods.
While executives said Flipkart’s Big Billion Days and Amazon’s Great Indian Festival will happen as per schedule in September to ensure their month-long sales calendar is not impacted, the platforms told the brands to be prepared for a late surge in sales in October in the second and third leg of their festive sales. The sales are likely to start around September 16-19.
Brands have also been asked to keep sufficient inventory ready in case the GST rate cut is effective earlier than expected, which would lead to a demand spurt as prices would fall by at least 8-9%, the executives said.
Amazon and Flipkart did not respond to email queries.
Avneet Singh Marwah, chief executive at online-focused TV manufacturer Super Plastronics said the ecommerce platforms do not want to postpone their flagship festive sales. The company is licensed to sell brands such as Kodak, Thomson, and Blaupunkt.
“We fear consumers may postpone their purchases which may impact the first leg of the sale, but with the expectation that the GST rates will be cut by early October before Diwali it should be compensated then. The platforms have asked brands to keep sufficient stock for a late pick up,” said Marwah.
The first sale of the e-commerce platforms around Navratri is the largest business period for online platforms in India, contributing 40-50% of the total festive ecommerce business. Discounts also tend to be the highest during this sale.
Varun Gupta, cofounder at wearable and hearable brand GoBoult said the company has already produced and supplied the festive inventory to its partners in Amazon and Flipkart. He said the sales are happening as per plans though a GST rate cut may further boost demand. Around 80% of the brand’s revenue comes from ecommerce.
A founder of an apparel brand said the category may not see a sizeable impact in terms of customers delaying purchases during the festive season due to the GST cut. "Overall, there might be a 5-7% price benefit that can be passed on to the customers once the new rate slabs kick in... The combination of high-visibility sale events like BBD and the GST being lowered may result in one of the best quarters in recent memory for us," the person said requesting anonymity.
According to executives, the GST rate for large-screen televisions with more than 32-inch screen sizes, air conditioners, and dishwashers are likely to fall from 28% to 18%. Smartphone manufacturers through industry lobby, India Cellular and Electronics Association, have also requested the government to reduce the GST on smartphones to 5% from 18% now. GST on several aspirational goods may also come down from 28% to 18%. Certain fashion categories such as specific sarees or clothing may see rates fall to 5% from 12%.
Another founder of a direct-to-consumer footwear brand, which garners 60-70% of its sales from marketplaces like Amazon and Flipkart, said any margin enhancement from GST reduction will allow smaller brands to boost their visibility during the sale events.
"Consumers are extremely price-sensitive during the season and any tax relief that allows us to offer sharper price points can drive volume growth without compromising brand positioning," he said.
Overall, from the mid-year sales onwards, brands and sellers have been reporting strong sales—pointing towards a rising momentum for ecommerce sales in the festive season, ET reported earlier.
The marketplaces are particularly concerned about the impact on their upcoming flagship festive sales, their most crucial annual sales event. This sale usually happen ahead of Navratri festival by when the new GST rates are unlikely to come into effect, the executives said.
The GST Council is likely to meet in the third week of September to finalise the new GST rates and the date of implementation.
A Group of Ministers (GoM) on GST rate rationalisation Thursday approved the Centre's proposal to eliminate the 12% and 28% slabs, consolidating the GST structure into two rates—5% and 18%. A higher levy of 40% GST could be levied on sin products like alcohol, tobacco, and some luxury goods.
While executives said Flipkart’s Big Billion Days and Amazon’s Great Indian Festival will happen as per schedule in September to ensure their month-long sales calendar is not impacted, the platforms told the brands to be prepared for a late surge in sales in October in the second and third leg of their festive sales. The sales are likely to start around September 16-19.
Brands have also been asked to keep sufficient inventory ready in case the GST rate cut is effective earlier than expected, which would lead to a demand spurt as prices would fall by at least 8-9%, the executives said.
Amazon and Flipkart did not respond to email queries.
Avneet Singh Marwah, chief executive at online-focused TV manufacturer Super Plastronics said the ecommerce platforms do not want to postpone their flagship festive sales. The company is licensed to sell brands such as Kodak, Thomson, and Blaupunkt.
“We fear consumers may postpone their purchases which may impact the first leg of the sale, but with the expectation that the GST rates will be cut by early October before Diwali it should be compensated then. The platforms have asked brands to keep sufficient stock for a late pick up,” said Marwah.
The first sale of the e-commerce platforms around Navratri is the largest business period for online platforms in India, contributing 40-50% of the total festive ecommerce business. Discounts also tend to be the highest during this sale.
Varun Gupta, cofounder at wearable and hearable brand GoBoult said the company has already produced and supplied the festive inventory to its partners in Amazon and Flipkart. He said the sales are happening as per plans though a GST rate cut may further boost demand. Around 80% of the brand’s revenue comes from ecommerce.
A founder of an apparel brand said the category may not see a sizeable impact in terms of customers delaying purchases during the festive season due to the GST cut. "Overall, there might be a 5-7% price benefit that can be passed on to the customers once the new rate slabs kick in... The combination of high-visibility sale events like BBD and the GST being lowered may result in one of the best quarters in recent memory for us," the person said requesting anonymity.
According to executives, the GST rate for large-screen televisions with more than 32-inch screen sizes, air conditioners, and dishwashers are likely to fall from 28% to 18%. Smartphone manufacturers through industry lobby, India Cellular and Electronics Association, have also requested the government to reduce the GST on smartphones to 5% from 18% now. GST on several aspirational goods may also come down from 28% to 18%. Certain fashion categories such as specific sarees or clothing may see rates fall to 5% from 12%.
Another founder of a direct-to-consumer footwear brand, which garners 60-70% of its sales from marketplaces like Amazon and Flipkart, said any margin enhancement from GST reduction will allow smaller brands to boost their visibility during the sale events.
"Consumers are extremely price-sensitive during the season and any tax relief that allows us to offer sharper price points can drive volume growth without compromising brand positioning," he said.
Overall, from the mid-year sales onwards, brands and sellers have been reporting strong sales—pointing towards a rising momentum for ecommerce sales in the festive season, ET reported earlier.
