An Epson printer, M200, is selling at Rs 13,999 in the July 24-26 Grand Gadget Sale Days on Flipkart. That's what it was available for before the Goods and Services Tax.
The online price hasn't changed even after the Japanese maker of printers and scanners notified through newspaper advertisements that it will increase to Rs 15,199 once the new nationwide tax rolls out.
Amazon, Flipkart and Snapdeal, like several brick-and-mortar peers, offered discounts of up to 80 percent on various items in the run-up to GST. They have continued these offers after July 1 when India switched to the new tax. The government's decision to defer 1 percent levy on merchants selling via e-commerce platforms has only made it easier.
GST was just a pretext used by e-commerce companies and retailers to cut stock ahead of the new indirect tax regime, Devangshu Dutta, chief executive officer of Third Eyesight, a retail consultancy, told BloombergQuint. Discounts drive business for e-commerce platforms and are unlikely to end, he said.
Utkarsh Biradar, senior vice-president, products division, at Tiger Global-backed Shopclues.com, concurred.
Reducing prices is a marketing strategy. I am not sure if e-commerce players will stop discounting.Utkarsh Biradar, Senior Vice-President - Products, Shopclues.com
Apart from continuing earlier discounts, e-tailers are rolling out new offers as well. A week ago, Paytm Mall, owned by SoftBank and Alibaba-backed Paytm E-commerce, offered a maximum discount of 80 percent with Rs 20,000 cashback for 72 hours ended July 20.
Earlier this month, Amazon too launched a sale for its Prime members, who the company says contribute 35 percent of its orders in India.
Sellers are lowering prices on the stock bought in the previous financial year, Vishesh Khurana, co-founder of e-commerce platform Kraftly told BloombergQuint. “Since the sellers on an e-commerce platform have more time, the discounts on the current stock will follow until next circular (regarding the 1 percent tax).”
Relief For E-Commerce Companies
The GST Council had decided to levy 1 percent tax collected at source on merchants selling through e-commerce platforms. E-tailers were expected to deduct it while making payments, squeezing the sellers' working capital. On June 26, the government deferred the tax.
For small suppliers operating on thin margins, the monthly impact of 1 percent deduction will be significant, said Shopclues' Biradar. The tax paid will be available as input credit to the supplier on 15th of the next month, which means 30-45 days of blocked working capital, he said.
“…If selling online means blocked cash and additional reconciliation, we believe it will be a deterrent to those selling online,” Biradar said.
Khurana of Kraftly said the motive is to map every transaction to improve transparency. “It will be beneficial for both sellers and e-commerce players in the longer run,” he said.
Flipkart did not respond to emailed queries. An Amazon spokesperson said the company has received “encouraging feedback from our sellers over the last few days regarding the changes we introduced to support the transition”.
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