GST Rollout: What It Means For Online Consumers

After GST being passed in the Rajya Sabha on Wednesday, India assumes the futuristic tax regime to bring all indirect taxes coherently under a single umbrella. But the key lies with its successful implementation.

Quite literally, the Goods and Service Tax Bill will be levied on every single goods or services purchased by a person. The bill aims to eliminate the cascading effect of taxes on production and distribution prices of goods and services. Most simply, it means letting go the different charges levied by state and union governments separately till now.

The currently followed multi-staged tax-structure that includes a list of indirect taxes: Income tax, service tax, central sales tax, excise duty and security transaction tax and VAT/sales tax, Octroi, state excise, property tax, entry tax and agriculture tax will all be summed up together.

Lets' talk about how GST will affect your online purchases and lifestyle brands?

Assumption: Many believe that the bill will greatly impact their fashion expenditure and the GST levied on lifestyle items, seems to be huge!

Prediction: Since the consumer perception will change after GST legislation, a slowdown in purchase of online, fashion is expected. However, a shopping rush may also happen before April 1, but it will normalize very soon. The retailers online/offline will now have a more level playing field than they ever had. Most, importantly items like Cosmetics and Gold can get pricy. So, some might change what they buy and others might like to stock.

Assumption: If the online sector in India comes mostly in the unorganized sector, GST won't affect it at all?

Prediction: No, that's not the case. GST will benefit those companies that have not availed tax exemptions in the past. It will also reduce the price gap between the organized and unorganized sector. The warehouse/logistics costs across the operational and non-operational segments will be curtailed. The operational profitability will also be up by 300-400 bps. The 7th Pay Commission is also expected to boost demand and fund inflow in the consumer durables sector by the end of the year.

How is the economy dealing with it?

After years of political bickering, the confusing mesh of taxes and duties is finally being done away with. Now, India's 29 states and the central government will not be blamed for bogging down businesses. Although, the rate of tax is yet to be set but the need for a bigger tax machinery cannot be ignored.

"It would convert India into one uniform economic market with a uniform tax rate, bring about a seamless transfer of goods and services across the country, enable us to check evasion and therefore enlarge the revenues," Aun Jaitley, FM said.

Even big and small retailers extended support to the government on the rollout of the GST bill, saying that "India might reverse the 'Brexit' moment by ending state to state rules and creating a nationalized market. The seamless push of supplies from one area to another is what is required," says Sachin Bansal, Flipkart Co-founder.

At present, supply chains for e-commerce companies are not optimized but distorted, due to state regulatory hurdles. It prevents them from offering customers the lowest cost or fastest delivery. Paper-works, double taxation, reaching a new tax domicile, all of these would trouble a supplier big time.

Businessworld's take: Since the GST is levied on all gods and services, prices will not see a significant increase on most items of daily use. In the long run, making it easy for the consumer to gulp down the uniformity in taxes, it will boost the demand across all sectors. Indefinitely, it can be said that if the demand increases, it will lead to creation of more job opportunities. Slowly, but most certainly the informal sector will also be brought under the tax-regime.