Flipkart, Amazon India rain discounts to clear stocks ahead of GST rollout

Financial Express By Anushree Bhattacharyya and Sumit Jha June 7, 2017 6:55 AM

Vendors on e-commerce platforms are trying to liquidate stocks estimated at around `20,000 crore

Many of the sellers are expected to offer attractive discounts to tempt buyers. Emails sent to Flipkart and Amazon did not elicit any response till the time of going to press.

Apprehensive that they may lose out post the rollout of the goods and services tax (GST) from July 1, vendors on e-commerce platforms are trying to liquidate stocks estimated at around Rs 20,000 crore. Market watchers say sellers are looking to clear stock lying in warehouses, as they apprehend the new tax rates and rules might result in a loss for them post July 1. They add there could be several sales held this month as vendors including WS Retail and Couldtail –the biggest vendors on Flipkart and Amazon India respectively — get rid of inventory. Many of the sellers are expected to offer attractive discounts to tempt buyers. Emails sent to Flipkart and Amazon did not elicit any response till the time of going to press. Earlier this month, the GST Council raised the limit on input tax credit to 60% from the earlier 40%; this is for goods which attract a GST of 18% or 28% without excise payment receipts. The input tax credit refund against excise paid on items which attract a tax rate lower than 18% would remain at 40% of the total GST liability. Further, the GST council stated a 100% input tax credit against excise can be availed on high-value items above Rs 25,000 with a serial number. Compared to the rules proposed earlier, the final rules are more friendly. However, online sellers claim that despite the new rules, they will have to incur a loss if current stock is sold post July 1. Instead, clearing the present stock would allow them to lower the tax burden, thus bringing down the losses. “I would not get any input credit on 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,” said Neeraj Johar, a Jaipur based online seller of IT products.

Bangalore based seller Gaurav Singh, who sells electronic and mobile accessories, pointed out that GST sellers can claim a100% input tax credit against excise that can be availed on high-value items above Rs 25,000 with a serial number and 60% on goods values less than Rs 25, 000. “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 of as much of the stock possible,” explained Singh. Another apparel maker explained that as apparel and footwear products cost less than Rs 25,000, he would be able to claim input credit for 60% of the stock and pay tax for the rest 40%, or ask a brand to compensate him. For what seems like a cumbersome process, tax related solution providers like Cleartax call the sale of goods by sellers at a discounted rate, a logical move, as this would allow them to reduce tax burden.

“Despite the availability of input tax credit, it makes sense for sellers to offer discounts and clear their stock due to compliance burden if they carried the stock into July. To get input tax credit on the excise paid, the seller would have to identify the eligible stock and gather all the relevant documents to apply for input tax credit under GST. It could turn out to be extremely cumbersome for many sellers,” said Archit Gupta, CEO and founder, Cleartax.com, a tax related solution provider.

Apparel, footwear, electronic accessories, mobile accessories, apart from premium watches, women handbag, leather products, health and beauty products – are some of the categories where sellers are hoping to reduce stock.

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