GST impact: This festive season don’t expect discounts, freebies, buy-one-get-one free schemes to come your way
As the festive season approaches, consumers are over and over again spoilt for choice among the product categories as malls, branded stores and retail stores try to increase sales by offering huge discounts and freebies.
But the launch of the goods and services tax (GST), a new indirect tax regime, few month back started prompting the companies selling consumer goods, to adjust their plan of action for discounts while freebies, gift vouchers and promotional offers would not directly be offered to attract the consumers.
Such is a case because, with the advent of the new tax structure, the gifts and freebies provided by the companies or the retail shops will attract GST.
Also, the input tax credit can only be availed by the manufacturer or retailer, on the goods sold that has an economic value attached and not on those items which carry zero economic value. As a result, a manufacturer will not be allowed to claim the input tax credit for any commodity sold at a discount or which carries a price tag of ‘zero’ and hence the manufacturer will have to bear the entire tax on goods sold.” According to the managing director at fashion chain Provogue, the business standard report, quoting Nikhil Chaturvedi said that manufacturers reveal if they do not get input tax credit, they will not give freebies, because economics of any offer has to work. Various brands in the market like – ONLY, Vero Moda, AND have started skipping gift vouchers and, and are instead giving straight discounts to the buyers. This helps them, as they don’t have to pay any tax for selling discounted items, reported by Business Standard. Even the makers of packaged food products are doing away with buy-one get-one-free offers.
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