GST compel sellers to take their pick from discounting or loss

The Goods and Services Tax (GST) is all set to be rolled out in July 2017. This would alter the tax structure of sellers’ (online & offline) existing stock. That’s why vendors are trying to clear their inventory before GST is implemented by offering discounts.

The alternate to this is incurring loss, since the new tax structure under GST would eat away the profits.

Indian ecommerce biggies like Flipkart and Amazon have also asked sellers to recall their inventory from marketplaces’ fulfilment centres. But taking back the stock would invite various state border taxes as well.

Speaking on this issue, the representative of the All India Online Vendors Association (AIOVA) said, “If we recall the inventory from the warehouses of e-marketplaces to get the MRP changed by the brands, we have to bear the recall fee of around Rs 25,000 for 1,000 units to get it sorted and sell it after GST roll-out. If we sell it as is in the new tax system, we’ll be doing so at a loss… Everyone is trying to clear their stock pre-GST so that they won’t have to incur any additional cost on their stock after GST. A few days ago also there was a sale on Flipkart, and everybody is putting out more ads so that stocks can be liquidated.”

Getting GST compliant would be tough for sellers and marketplaces

Be it sellers or etailers, all are on the side of GST. It would help Indian ecommerce companies to get rid of tax woes and sellers too believe that it is a big step ahead.  But just like any big reform, the transition period is going to be rough for both.

The three options available to sellers are:

1. Sell the stock at a discounted price
2. Sell it after GST is implemented and bear the loss
3. Recall the stock and ask brands to change the MRP by paying various State taxes and marketplace fees

“Sending back stock and taking it through state borders will involve tax implications. If the stock is in transit during the transition, then also there are rules and regulations around it,” stated Cleartax founder Archit Gupta.

Buzz is that the Indian government would offer rebates on goods sold during the GST transition period.

As for ecommerce players, Amazon India is combing through the GST developments and enabling its systems to make it compliant with GST regulations. Indian etailer Shopclues is waiting for more details to come on the surface, so that they can integrate those changes in their system.

To say that it is a Catch-22 situation, would be an understatement. Let’s hope that the government and online marketplaces make it easy for sellers to go through this transition period.

Sellers, how do you plan to deal with this situation? Do you have an alternate option besides the three mentioned above?