Rush to woo clients, clear stocks before GST

By Times Of India on 01 Jul 2017 | read
Nagpur: A cross-section of businesses tried to hard sell their products in June before Goods and Services Tax (GST) sets in from next month.

There was a rush to buy white goods, especially large-screen televisions. But consumers' response largely remained lukewarm for a number of other products. A lull is, however, expected for at least a couple of weeks after the new tax regime is in place. This is due to the fat that confusion remains on several aspects concerning GST, say tax practitioners.

Right from insurance service providers to fertilizer makers, no one left any stone unturned to woo clients to buy before the new taxation law comes into force. The idea was to clear the old stock which had the printed rates according to the present tax structure. For service providers, it was an effort to clock in maximum business before GST.

"The sales have gone up by nearly 50% due to the discounts offered for pre-GST sale. There has been a considerable rush to buy large-screen televisions. It is because there is a general perception that cost of the product would increase considerably after GST," said Ashok Kumar Gandhi of A K Gandhi Group, which deals in consumer durables as well as automobiles.

Gandhi said GST will increase the tax component by 15% on white goods. Discounts up to 50% are being offered for the products, which has spurred the sales. But at the same time, there was no major increase in the sale of automobiles, both four-wheelers and two-wheelers.

"In four-wheelers, we are offering discounts up to Rs1 lakh. However, it did not enthuse the consumers much," he said.

Nikhil Kusumgar, a two-wheeler dealer also confirmed that the pre-GST hype did not lead to any major difference in sales.

"Our sales have gone up by within 30% of the normal average. A demand was seen for products like TVs, refrigerators and washing machines. But it is not as much as festive sales," said a representative of a leading white goods store at Dharampeth.

Bhartia Parekh, an insurance agent, said though GST will increase the tax component on insurance services, there was no rush to pay the premium before or buy new plans. "This is probably because the impact on absolute terms will not be much. For example, the tax comes to Rs2,250 for a premium of Rs1 lakh which gives an assured sum of Rs25 lakh in an endowment policy. It is Rs1,800 under service tax provisions," said Parekh.

As GST will nearly double the tax component on fertilizers, manufacturers have been wooing farmers to buy before July. This has led to around 15% increase in sales as farmers only with ample liquidity are preferring to buy in advance.

"The cost of fertilizers like DAP will increase by Rs50-60. The tax component on pesticides will also increase on account of GST," said Sharad Chandak of Nagpur Agro Dealers Association.

Gold will attract 3% GST as against 1% VAT at present, a section of traders said consumers have increased buying in June. Though others in the sector reported normal business.

Export freight will attract 5% GST. This has led exporters to approach shipping lines to generate bill of lading before July 1. This will bring bookings at a pre-GST date, said Shiv Kumar Rao of R & Y Logistics.

"The Confederation of All India Traders will mark beginning of GST regime by striking the first transaction on midnight of July 1 at a function planned held in the city," said B C Bhartia, the association's national president. "However, confusion remains on several aspects and a lull is expected to remain in the first week of July after which business may slowly pick up," he added.