KOLKATA/MUMBAI: For shoppers of white goods, the singeing summer has brought a cool Diwali gift. Costly home appliances are now available at 20-40 per cent discounts, as electronic-goods retailers rush to clear their old inventories ahead of the July 1 rollout of the goods and services tax (GST) and minimize their losses.
Television-sets, refrigerators, air-conditioners and washing machines now have their price tags slashed. Discounts vary, depending on the life of the old stock and the cost price: Retailers say they would make a loss of about 6 per cent on unsold stock purchased before May, and about 14 per cent on one-year old inventories, against which input credits cannot be availed.
The discounts are available even after the GST Council increased excise credit to 60 per cent from 40 per cent on the transitional stock during its last meeting on June 3.
The usual discount offered by the retailers is around 10-15 per cent on maximum retail price (MRP) and it will now significantly go up -about three-fold.
Even brands such as Samsung, Panasonic, Hitachi and Videocon BSE -4.86 % have come up with consumer promotional offers – gifts and extended warranties – to boost sales since retailers and distributors have stopped picking up stock to clear the existing inventory, two senior industry executives said.
“It’s almost a mid-year Diwali for consumers in June, as most retailers will be doling out huge discounts to clear inventory before GST is rolled out. Retailers want to liquidate their entire stock as they cannot bear the load of the remaining 40 per cent central GST which will not be credited to them on unsold inventory,” said Pulkit Baid, director at Great Eastern, which is one of the largest white goods retailers in the East.
Vijay Sales managing director Nilesh Gupta said every retailer would want to have the minimum stock by July. “While we are clearing stock on discounts, we are also losing money to do so. It’s a onetime pain and July sales will be hit badly due to an early discounting this year,” he said.
According to industry executives, some of the large consumer electronic retail chains are sadd led with old inventory of more than Rs 100 crore each. These would make a big dent on their margins, since the white-goods makers have come up with compensation schemes for unsold stock purchased only in May and June.
The old inventory would also include products that are on display on the shop floor, since several of them tend to be a year old and eventually sold to customers. A senior executive with a leading consumer electronics chain said the company is even sacrificing margins to clear out stock.
Prices of consumer electronics are set to go up by 3-5 per cent after GST due to increase in taxation. Mumbai’s leading electronics retail chain, Kohinoor, is offering nearly 40 per cent discounts on goods kept on display. “Most of the goods on discount especially cellphones and LED TVs are end of the life models and we are treating them as a stock clearance. For other goods, the offers are a sign of desperation,” said director Vishal Mewani.
The GST Council, in its last meeting Saturday, agreed to increase deemed credit to 60 per cent for products in the GST slab of 18 per cent and more. White goods, televisions, kitchen appliances and small appliances fall under the 28 per cent GST slab.
The Council also proposed allowing 100 per cent credit in case of highvalue items priced above Rs 25,000 based on the tracking of the product, even without documents detailing the actual payment of excise duty. However, the industry awaits clarification on the definition of tracking and whether it’s on the MRP, base price, or market operating price.
Godrej Appliances business head Kamal Nandi said if the industry can avail benefit of 100 per cent credit, around 25 per cent of the stock will be covered, and the balance 75 per cent must be liquidated by trade. “Hence, the discount will continue at the retail end,” he said.