Amazon, Flipkart offer discounts to clear stocks ahead of GST roll-out

Some industry insiders say that orders may become normal only by the time Diwali comes around

E-commerce vendors in India, like their offline counterparts, are going all out to liquidate stocks ahead of the roll-out of the Goods and Services Tax (GST) on July 1 as they fear incurring losses due to the new tax regime.

Sellers are even asking e-commerce marketplaces such as Amazon and Flipkart to host sales this month to get rid of existing inventory. Currently, vendors are placing orders for products from manufacturers or dealers only after receiving confirmations rather than ordering in bulk and selling the stock over time.

"There is no question of selling online or offline, it’s the same story everywhere. No one is buying inventory and some are even selling their existing inventory at a loss. This is happening across industries and across categories," said Sanjay Thakur, president of e-Seller Suraksha. 

Under the new GST rules, sellers can avail up to 60 per cent input tax credit on items which attract between 18 per cent and 28 per cent GST. Further, 100 per cent input tax credit can be claimed against excise duty for items valued over Rs 25,000.

However, sellers are worried that being unable to comply with the new GST rules immediately will mean that they will not be able to claim the tax credit on older stocks. Citing this loss, sellers are saying that it's better to incur losses by selling off their old inventory now instead of suffering losses for selling them after July 1.

"We are expecting it to take at least a quarter for vendors to get used to the new rules under GST. There are many roadblocks which need to be removed and that will happen only after implementation. We don’t expect orders to become normal until the Diwali period,” added Thakur.

A representative of the All India Online Vendors Association (AIOVA) who did not wish to be identified reaffirmed the troubles that the country's sellers are facing, both online as well as offline. Sellers will find it extremely hard to apply for input tax credit for goods already bought that get sold after July 1. 

"Things have been bad, no one is placing orders for new inventory since it is better to incur losses and get rid of existing inventory. It’s the same scenario online as well as offline. We hope that once GST becomes active, things will go back to normal,” the representative said.