Business

How GST Will Impact Retail And End Of Season Sales

The new GST structure will replace existing indirect taxes with a fixed tax structure for each product category which will vary from 5% to 28%. For example, apparel costing less than Rs 1,000 will bear a tax of 5%, while a 12% tax will be levied on the ones costing above Rs 1,000.

One thing which is certain is that this move will benefit non-premium brands which generate 80-90% of the sales from products worth less than Rs 1,000, but premium brands might take a hit.

What would be the impact on EOSS this year?

Last year's Summer End of Season Sales (EOSS) didn't end on a happy note with close to 5% drop in footfall and 2.5% dip in overall sales. This year the situation is pretty uncertain, mainly due higher taxes on premium products and competition from e-commerce players who are already on a mission to lure customers with heavy discounting.

Though EOSS typically begin during June end every year, this year most brands and even marketplaces like Flipkart have already started the sale with full fledged marketing. Most retailers have increased discounting from last year to get ahead of the competition.

Capillary Technologies' internal study on the impact of GST on EOSS revealed a projected sales surge of 2-3% for most non-premium brands including hypermarkets where 80-90% sales come from products worth less than Rs 1,000 while a proportional sales drop is expected for premium-brands where only 1-2% sales come from such products.

What does it mean for consumers?

GST is poised to bring long-term benefits for consumers. Now customers won't have to pay taxes-on-taxes which will bring down prices of most commodities and enhance product availability.

Just as there was an initial disturbance after demonetisation, GST's impact in the coming times could be far reaching. According to IMF, GST has the potential to raise India's medium-term gross domestic product (GDP) growth to over 8% and create a single national market for enhancing the efficiency of the movement of goods and services.

Besides improving the ease of doing business, GST will also propel job hirings by about 11% across sectors, according to a study by TeamLease.