Major ecommerce firms complete tax-system overhaul ahead of festival season

Companies update platforms, train sellers on new tax codes

Major Indian ecommerce companies, including Flipkart and Amazon, have completed technical preparations for the country’s simplified two-tier goods and services tax (GST) structure ahead of the shopping season, positioning themselves to capitalise on festival sales, which are projected to grow 27 per cent to ₹1.2 trillion. 

The companies have updated their platforms and trained thousands of their sellers on the new tax codes, which take effect on September 22, just as the industry enters its most lucrative period. 

“Technology has played a pivotal role in developing backend solutions, giving sellers clear visibility into the revised GST codes and enabling a seamless transition to the new tax framework,” said an executive at a leading ecommerce firm. 

“Compliance and ease of doing business have significantly improved for our sellers,” the executive added. 

The streamlined GST structure is expected to boost sales by 15-20 per cent as retailers pass on tax savings to consumers during the peak shopping weeks. 

“The expected surge is likely to be accompanied by significant savings for consumers,” said an executive. 

The new framework reduces the current multiple-slab system to just two rates — 5 and 18 per cent. 

Industry executives said due to revised GST-rate differentials shoppers might save at least 10 per cent, amounting to approximately $1 billion, over the period. 

The savings apply particularly to electronics and consumer durables like TVs, air conditioners, and home appliances. 

The reform, coinciding with India’s traditional festival-buying season, could provide a tailwind for ecommerce platforms, which have spent weeks preparing their systems for the transition. 

Some ecommerce outfits have begun rolling out sale events ahead of September 22, possibly in an effort to clear inventories.

“Sellers will likely need to reduce product prices. While larger sellers are expected to comply, smaller merchants may resist the move,” said an executive at another ecommerce platform. 

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

“We’re expecting a significant uptick in sales growth this year, driven in part by the buzz around GST changes,” said Satish Meena, founder, Datum Intelligence. 

“Last year’s growth was relatively muted but this season we anticipate smartphones and TVs will lead the charge in consumer demand.” 

Flipkart’s latest insights (June-August as compared to March-May) highlight how users across age groups and regions are embracing devices. From laptops and desktops to gaming consoles, digital cameras, smart wearables, smart home solutions, and even two-wheelers, Flipkart is witnessing multifold growth across its diverse and technology-forward selections. 

“We are witnessing a dynamic shift across all tiers and consumer cohorts as we approach the festive season,” said Sujith Agashe, vice-president (electronics), Flipkart. 

“From students in small towns to creators in Tier-I plus cities and families in major metros, demand for consumer electronics is clearly rising.” 

In urban India, consumer sentiment turned net positive for the first time in three years, with 37.6 per cent reporting higher non-essential spending in July, signalling a rebound in discretionary demand ahead of the festive season, according to the Datum report. 

In rural India, the report said non-essential spending surged 54.7 per cent in July, the highest in two years, indicating robust consumption recovery, with net sentiment jumping to plus 37.2 and expectations of further spending growth ahead of the festival season. 

Cashing in 

*  New tax framework likely to boost festival sales by 27% to ₹1.2 trillion this year

  *  Consumers expected to save 10% on electronics and durables

  *  Urban, rural non-essential spending shows strong rebound ahead of season