Can GST rate rejig lead to a logistical nightmare for retailers? Experts flag concerns

The recent overhaul of Goods and Services Tax (GST) slabs, though hailed as a landmark policy move, has unleashed a wave of operational challenges for India’s retail sector. Chartered Accountant Anupam Sharma highlighted that retailers are facing the daunting task of re-tagging unsold merchandise with revised prices, just as the all-important festive season kicks in. For an industry that depends on festive sales for a large share of its annual revenue, the timing could not be more difficult.

According to the Retailers Association of India (RAI), the issue goes far beyond simply printing fresh labels. Current legal metrology rules mandate that any price change on pre-packaged goods requires government approval. For a sector dealing with millions of stock-keeping units across stores and warehouses nationwide, seeking approvals and re-stickering within days is close to impossible. Anticipating bottlenecks, RAI has approached the legal metrology department, requesting a workable solution that safeguards compliance but also allows for business continuity.

The challenge is compounded by the surge in festive demand. Retailers must simultaneously manage soaring footfalls, run promotional campaigns, and deal with supply chain pressures, all while undertaking the labor-intensive exercise of re-labeling products. The dual burden of regulatory obligations and consumer expectations could push many companies to temporarily slow down sales or defer new production until the transition stabilises.

Another concern involves Input Tax Credit (ITC). Businesses that procured inventory at older tax rates remain unclear about how to align ITC claims with the revised GST slabs. This uncertainty could distort working capital cycles, affect margins, and reduce near-term profitability.

GST rate rationalisation

The GST Council has simplified the tax structure by scrapping the 12% and 28% slabs, leaving only 5% and 18%. From September 22, GST on premium consumer durables—televisions, air-conditioners, dishwashers, projectors, monitors, and set-top boxes—will drop from 28% to 18%. Analysts expect this move to stimulate demand in high-value categories. Datum Intelligence projects that festive sales in 2025 will surge 27% year-on-year to Rs 1.2 lakh crore, compared to nearly Ra 1 lakh crore in 2024 and Rs 81,000 crore in 2023. Without the GST cut, growth had been forecast at only 5–7%.

Yet, passing on these benefits quickly is no easy feat. Under the GST law, the applicable rate is determined at the time of invoicing. Products already dispatched to distributors before September 22 still reflect the old rates. Adjusting these requires extensive coordination across manufacturers, wholesalers, and retailers. Trade margins, credit notes, and promotional offers must all be recalibrated to reflect new realities.

“Trade promotions and schemes may need recalibration. Distributors might seek credit adjustments for inventory purchased at higher GST rates. Companies also need to update ERP systems, billing software, and point-of-sale terminals,” Naveen Malpani, partner and consumer industry leader at Grant Thornton Bharat, told the Times of India.

In summary, while the GST rejig promises to simplify taxes and spur consumer demand in the long run, its immediate impact is a logistical headache for retailers. The episode underscores a recurring lesson: large-scale tax reforms, however well-intentioned, require carefully planned transition mechanisms to ensure that businesses and consumers are not caught in the chaos of implementation.