Festive Retail Sales Hit as Buyers Await GST and Price Cuts
By Pankaj Doval, Times of India
New Delhi: The news of a reduction in goods and services tax (GST), while cheering consumers and companies, has led to a peculiar problem for retailers, both offline and online. Companies report that festive demand, which typically begins from the Ganesh festival in Maharashtra and Onam in the south, is turning out to be a muted affair as buyers wait for the GST rates to actually come down, which will ultimately result in lower retail prices.
We are worried as the festive opening is normally a bumper period, running up to Dussehra and Diwali. But the news of a GST rate cut and the impending reduction in retail prices is keeping buyers out of the market until a decision finally happens on the ground,” said executives from car and consumer goods companies.
The situation is similarly dire for white goods retailers, such as those selling TVs, air conditioners, and dishwashers. “We are already fielding numerous queries from buyers about price cuts and when they will actually happen. Buyers have indicated they will wait for price reductions before finalizing their purchases,” said the CEO of a leading consumer goods company.
Many consumers have decided to wait rather than make purchases, with reports of some even canceling car bookings.
Impact on Sales
Brands like LG, Samsung, and Sony are experiencing a slowdown in TV sales, while dealers are faced with high inventory due to the anticipated festive rush. If stock is not liquidated within the next 60 days, banks will charge higher interest rates on inventory finance and impose penalties, according to the Federation of Automotive Dealers Association.
Upcoming GST Council Meeting
The GST Council is scheduled to meet on September 3 and 4 to discuss rate rationalization, including a switch to a two-slab structure alongside one more for luxury and sin goods. This two-day meeting will be preceded by a meeting of officers on September 2, as indicated by an office memorandum from the GST Council Secretariat.
The ongoing exercise to rationalize GST rates is likely to see the government reduce taxes on certain categories of consumer goods and automobiles. Small cars and two-wheelers are expected to see GST rates fall from 28% to 18%. Additionally, TVs (larger than 32 inches) and dishwashers may also enjoy similar reductions.
Companies find themselves in a dilemma, as price cuts will only be possible following the GST Council’s approval and the announcement of final tax slabs. In the meantime, consumers are holding back on purchases, with many cancelling their car bookings.
Saharsh Damani, CEO of the Federation of Automotive Dealers Association (FADA), stated, “We are already seeing pressure in Kerala and Maharashtra regarding sales conversions. Dealers are carrying high inventory due to the expected festive rush, and if this stock is not sold within 60 days, banks will impose higher interest rates on inventory financing along with penalties. We are seeking assistance from banks, car and two-wheeler companies, and the government. Both the commerce minister and the heavy industries minister have assured us of help.
As the festive season approaches, brands such as LG, Samsung, and Sony continue to grapple with a notable slowdown in their TV sales.
