May 2017 was great for both Amazon India and Flipkart. Smartphones, consumer electronics, and large appliances like air conditioners and refrigerators were the top categories for Amazon. At Flipkart, discount of 40 percent on televisions, refrigerators, air conditioners, and washing machines resulted in a sales growth of 1.5 times over normal days. Tier-2 and Tier-3 cities saw major customer acquisition growth. Exchange offers were popular. Amazon kept the fierce price war alive, by continuing to offer aggressive pricing, which it had for the Great Indian Sale, while the Flipkart Big 10 Sale was still on.
June might see a briskness in sales in anticipation of GST implementation from July 1. With VAT in the range of 12.5 to 14.5 percent, depending on the state, and excise duties including cesses at 8.6 percent, the proposed 28 percent GST on consumer electronics and home appliances will push the prices up by 4–5 percent.
On the other hand, GST is good for the e-commerce industry. Being a destination-based tax on consumption, it will eliminate hurdles in inter-state delivery and subsume the entry tax introduced on e-commerce shipments by some states. In the GST regime, the vendor has to pay GST and instances of holding e-commerce companies responsible for vendors’ tax payment will come down.
No doubt, after a couple of quarters, as the industry stabilizes under the new tax regime, the extent of benefits will be visible. With emphasis on value addition, amalgamation of a large number of central and state taxes into a single tax and set-off allowance of prior-stage taxes, the ill effects of cascading will be mitigated. The free flow of tax credit in intra- and inter-state transactions will ultimately lead to a more efficient and leaner tax structure.
However, before this, issues as increase in compliance cost, compensation for revenue loss to states with manufacturing base, states having offered tax incentives for setting up manufacturing units, higher working capital requirement on account of tax liability on inter-state stock transfer, and many other similar ones will need to be resolved.
A race against time indeed!