GST overhaul may reshape ecommerce strategy ahead of festival season

The simplified two-tier GST structure is expected to boost festive season sales by 15-20% as e-commerce platforms prepare for a surge in demand

The simplified two-tier goods and services tax (GST) structure, set to take effect September 22, is reshaping e-commerce strategies just weeks before the country’s crucial festival shopping season with retailers expecting 15 per cent to 20 per cent surge in sales. 

Amid this expectation of a surge in demand, retailers are grappling with short-term operational challenges, according to industry executives.

 

The new framework reduces the current multiple-slab system to just 5 per cent and 18 per cent rates, prompting some consumers to delay big-ticket purchases in anticipation of lower prices while e-commerce platforms scramble to update billing systems and inventory management ahead of their biggest sales period of the year.

 

"It’s a positive move for customers, sellers, and e-commerce platforms in terms of improving overall efficiency,” said an industry executive. “We’re waiting to see the fine print. There may be a short-term slowdown as consumers hold off on big-ticket purchases, but demand for daily essentials is unlikely to be affected,” he said.

 

The executive added that companies may need to adjust their supply chain processes and lower product prices--steps that could pose operational challenges.

 

Industry executives expect the changes to boost festival season sales by 15 per cent to 20 per cent, particularly in electronics and consumer durable products like TVs, air conditioners, and home appliances, though smaller sellers may struggle with compliance adjustments in the near term.

 

“Some online consumers, especially for high-value products like electronics and appliances, may adopt a ‘wait-and-watch’ stance postponing purchases until new reduced GST rates become effective, with people anticipating potential price reductions,” said Paresh Parekh, partner and national leader for tax, consumer products and retail sector, EY India.

 

E-commerce platforms in the short term, Parekh said may have to deal with some issues with appropriate billing, invoicing, and inventory management. This is to manage compliance risks and logistical hiccups, particularly for smaller sellers who may lack infrastructure to rapidly adapt.

 

For the festival season, brands and retailers both online and offline can now launch offers, inventory decisions, and promotional campaigns with certainty. Overall, experts said that markets and stakeholders have welcomed the reform as a “Diwali bonus,” recognising its likely impact on consumer confidence and overall demand as well as investor confidence.

 

“This forward-looking reform brings much-needed predictability and stability to the tax framework,” said an Amazon India spokesperson. He added, “The streamlined approach will help reduce complexity for the hundreds of thousands of sellers selling through our marketplace.”

 

Amazon said this reform strengthens India’s position as a destination for continued investment and innovation in e-commerce. With a reduction in GST on popular festival purchases, along with top deals already planned by sellers, Amazon said customers can look forward to great savings during its flagship sale event ‘Amazon Great Indian Festival.’ The event is expected to go live September 23.

 

Amazon’s chief rival Flipkart is also planning to host its Big Billion Days sale this month.

 

“Timely implementation of these reforms ahead of the upcoming festival season will surely give a huge boost to consumption across categories, widen market access, and accelerate our collective journey towards a Viksit Bharat,” said Rajneesh Kumar, chief corporate affairs officer, Flipkart Group.

 

According to a report by Datum Intelligence, festival sales are expected to grow 27 per cent to about ₹1.2 trillion in 2025.

 

Archana Jahagirdar, founder and managing partner, Rukam Capital, which invests in consumer brands, said sales and retail push leading to the festivals has already begun with 92 per cent of Indian consumers planning to continue or increase their spending.

 

“The early trends have already recorded a 14 per cent increase in order value on e-commerce platforms and will also see an increase owing to the revised and lowered GST rate. This is a boost of confidence for homegrown brands and start-ups in India,” said Jahagirdar.

  Industry executives said with global demand showing the initial signs of slowing down and growing US trade tariffs impacting Indian exports, shifting the focus back to domestic consumption was the need of the hour.

 

“Cutting GST slabs across multiple sectors will certainly lift consumer’s spirits, giving businesses some breathing room to reconsider pricing and pass on the benefits, which is likely to boost demand, particularly considering that the festive season is round the corner,” said Kartik Jain, Partner, JSA Advocates & Solicitors.

  One can already see this playing out across sectors.

 

Jain said FMCG brands may consider adjusting pack sizes and pricing, durables and white goods manufacturers experiencing stronger festive season interest, and entry-level vehicle makers gearing up for a revival, especially in Tier 2 and rural markets. The agriculture-linked economy would also get a boost from these rate cuts, helping improve both production and rural spending.

 

“While simpler rates are a step in the right direction, many smaller businesses may still face challenges related to compliance and digital infrastructure, and ensuring targeted support will be essential to help them fully benefit from these changes,” said Jain.