How GST Can Affect Your Festive Season Shopping


Consumers are often spoilt for choice when it comes to festive shopping. Retail brands and stores try their best to boost sales through hefty discounts. But the launch of the new indirect tax regime in India, the goods and services tax (GST), prompted consumer-oriented companies to tweak their discount strategy. Tactics such as gift vouchers, free goods on the purchase of a certain amount, and promotional offers may not directly work to woo consumers. But, it also comes with multiple advantages of GST.

According to the new tax regime, freebies or free goods would also attract GST. As a result, most of the shopping done online and otherwise became expensive after the implementation of GST. This article explores how GST affects consumers’ festive season shopping and the benefits of GST registration.

The Need for New Strategies

Post-GST, consumer goods companies need to think of new strategies to attract customers due to the following reasons:

  1. Discounts, vouchers, and free goods will also come under the purview of GST.
  2. You can avail of the input tax credit only for products with economic value—goods with a price tag. The deduction cannot happen on zero-value products, i.e., free products given to a customer. Consumer-oriented businesses would suffer a double loss because they would be unable to claim deductions and would also have to pay GST.

Change in Popular Brands and Their Strategies Post GST Implementation

Here’s a gist of how well-known clothing retailers and food product companies plan to function post-GST implementation:

  • Brands like Vero Moda, ONLY, etc., provide straight discounts.
  • Parle products no longer provide the “buy one, get one” offer. Instead, they offer upfront discounts.
  • Brands such as Dabur and Marico have opted for combo packs and price cuts.
  • Popular food chains, such as Domino’s and Pizza Hut, no longer have the “buy one, get one free” offer. The Pizza Hut sales pitch changed to “2 pizzas at 50% off.”

Advantages of GST

Tax Collected At Source

Many retailers and online brands did not collect tax in any form. Under the GST, these brands began collecting tax at a fixed rate. eCommerce websites, for example, collect tax at a fixed rate of 1% and pay the sellers on their websites, allowing consumers to avoid paying taxes on goods. They can pay it upfront to the retailer while they purchase goods.

Faster Delivery

If consumers buy from an online retailer or an eCommerce site, their goods will reach them faster. This is because, under GST, retailers do not have to file separate paperwork for each state across India.

For example, if the seller is in Mumbai and you are based in Bangalore, the current system calls for filing a separate bill for logistics. The bill for state taxes must also be filed separately. Post-GST, this system got simplified. The states no longer impose extra paperwork. Everything will come under the garb of GST, saving everyone the hassle. This eventually results in making the entire delivery process faster.

Decrease in the Price Of Goods & Services

The central government charges GST at all levels of the supply chain. Therefore, you will find a considerable difference in the product prices post-GST implementation. Customers will hence be able to avail the advantages of GST as it will be lesser than VAT and service taxes.

For example, food items like grains, spices, etc. fall under the 0-5% GST range. This is extremely beneficial for the customers, as they would buy it at a cheaper price. Many other daily-use items, such as shampoos, tissue papers, toothpaste, soaps, electronic items, etc., have also become cheaper.

Other than that, there are multiple GST slabs applicable to different items. The mass consumption of spices falls under the GST slab of 5%, processed foods come under the GST slab of 12%, whereas luxury goods fall under the GST slab of 28%.

Improved Competitiveness

GST reduces the transaction costs of doing business considerably. As a result, the competitiveness of trade and industry has improved since the implementation of the GST. This is perhaps the most crucial advantage of the GST for consumers. Dismantling interstate taxes is one of the most crucial reforms long awaited in India’s manufacturing and retail markets.

Linear Pricing Across the Country

One of the major GST benefits is that it regulates the pricing structure. This is great for consumers, as they will get to pay the same price irrespective of their location or place of purchase. Under the GST, customers will be able to buy the product at the same price across the country. However, the products that fall under the GST tax slab only can avail of these GST benefits.

Improved Transparency

Another major advantage for traders (importers, eCommerce sellers, retailers, etc.) is the transparency that comes with GST. Under the GST, a majority of businesses have streamlined their operations for traders. This is because they have to pay only one tax — GST—for everything they purchase along the supply chain.

Easy Borrowing

GST unifies all of your financial transactions into a single system. This makes it easier for small and large businesses to maintain records of their transactions. Since it is easy to maintain these records, it has become much easier for traders to apply for bank loans. The system has all the history of the assets and the financial ability of the trader.

Final Thoughts

The onset of GST redefined shopping behaviour completely, even during the festival seasons. Consumers now expect discounts rather than over-the-top freebies. 

Be it food, garments, electronics, or any other industry benefiting from festival shopping, the GST had a massive impact on them in terms of profit. If you have any further doubts regarding the advantages of GST or want to learn more about the benefits of GST registration, consider consulting an institution like Piramal Finance. Their experts can help you calculate how much GST you will need to pay as a business owner and how to manage your finances.