Retailers across the country are offering heavy discounts to clear out their old inventories before the Goods and Services Tax is rolled out on July 1, The Economic Times reported. They believe that they would make a loss of about 6% on unsold stock purchased before May, and about 14% those purchased one year ago.
“It’s almost a mid-year Diwali for consumers in June, as most retailers will be doling out huge discounts to clear inventory before GST is rolled out,” Pulkit Baid, director at Great Eastern, which is one of the largest white goods retailers in the eastern region of the country, told The Economic Times. “Retailers want to liquidate their entire stock as they cannot bear the load of the remaining 40% central GST which will not be credited to them on unsold inventory.”
Vijay Sales’ managing director Nilesh Gupta said retailers across the country were trying to get rid of old stock before July 1. “While we are clearing stock on discounts, we are also losing money to do so,” Gupta told the newspaper. “It’s a onetime pain and July sales will be hit badly due to an early discounting this year.”
This, despite the government’s decision to increase excise credit to 60% from 40% on transitional stock. The GST Council is also considering allowing 100% credit for items that cost more than Rs 25,000 based on the tracking of the product, even without documents detailing the actual payment of excise duty. However, the government has not yet explained how this will work and whether the credit will be applicable on the MRP, base price, or market operating price.
Car dealers are also taking the discount route to increase sales before the GST roll out, reported The Financial Express. Cash discounts on Wagon R have been increased from Rs 20,000 to Rs 30,000, Swift is offering discounts of Rs 20,000 instead of Rs 10,000, Celerio has increased discounts to Rs 20,000 and Alto is offering cash discounts between Rs 30,000 and Rs 35,000 from Rs 20,000, The car dealers are also offering free insurance, loyalty bonus and corporate discounts.
“Though GST will not impact the sub 4 metre cars but we are offering more discounts since we have to maintain our retail sales in June,” an unidentified Maruti dealer told The Financial Express. “Otherwise most of the customers will wait for GST to kick in. So the only way to deal with this development is increase the discounts.”