GST rings early bonanza for shoppers across high streets and malls

GST rate of 12% is proposed for apparel costing above Rs 1,000 and 18% for footwear above Rs 500

The Goods and Services Tax (GST) is bringing in early bonanza for shoppers of branded apparel and fashion accessories across high streets and malls.

“End of season sale” of fashion retail brands, which typically starts in July every year, has mostly been advanced to June this time as companies want to clear their inventory before GST kicks in next month.

Brands such as Puma, Bata, ONLY, Jack & Jones, Vero Moda, Louis Philippe, Van Heusen, Benetton and US Polo have already begun their sales across major cities.
 

Retail chains such as Pantaloons, Lifestyle and Shoppers Stop are yet to come out with their formal end-of-season sale, but they have already started giving discounts on select brands in the range of 20-40 per cent.

According to the store manager of a Louis Philippe outlet in New Delhi’s Connaught Place, the outlet has an inventory of 10,000 pieces. “The management has ordered us to clear old stock as products will have new price tags starting July. So, we have started offering discounts between 30 and 40 per cent on all merchandise from today. This is a pre-GST sale,” he said. In Mumbai, Louis Philippe has started a preview of the sale, offering “buy three, get two free”.

It was a similar story at Van Heusen, or US Polo or Bata.

“Though the difference between old and new rates are not much, there would be some compliance issues if we do not liquidate old merchandise,” said an executive at textile major Arvind.

The government announced a GST rate of 12 per cent for any apparel costing above Rs 1,000 and 18 per cent for footwear above Rs 500. This is expected to either push up the prices of products marginally unless retailers absorb the increase.

“Retailers are saying they are advancing end of season sale due to GST, but I do not know how much GST has contributed to their decision,” according to Anupam T, vice president at Oberoi Mall in Goregaon area of Mumbai.

Mukesh Kumar, senior vice-president at Mumbai-based Infiniti Malls, said apparel brands were already prepared for the higher rates under the GST. “They have not kept higher stocks anyway. They know they have to advance the sale to clear the existing stock,” Kumar said.

While food and grocery chains are yet to come out with any sale, analysts expect destocking to happen there as well.

“Destocking will happen in second half of the month. Companies are aware of retailers’ concern and do not want a situation of stock-outs. They are willing to compensate wherever there is compliance and data,” said Abneesh Roy, senior vice-president of institutional equities at Edelweiss Securities.

However, retailers contested that view.

Rakesh Biyani, joint managing director at Future Retail, said there was sufficient input credit which would bridge the gap between old rates and new rates.
 

“The difference between old and new rates in apparel is just 0.9 per cent. So there is not much burden,” Biyani said.

Neville Noronha, managing director and chief executive of D-Mart, pointed out that the value retail chain works on an optimal inventory of 30 days. "We anyway don’t keep much inventory. Reducing it further would lead to losing sales," he said.