Queues at car dealers, online carts piled high on day 1 of GST 2.0 launch

The launch of the new goods and services tax (GST) regime on Monday saw big crowds at auto dealerships and a surge in online sales, as consumers waiting for a price drop in groceries, electronics, apparel, and other items of daily consumption got busy spending.

Buyers made a beeline for small cars, which got the maximum price cuts in GST 2.0, the first major overhaul of the indirect tax regime since its rollout in July 2017.

Prime Minister Narendra Modi had announced the “Diwali gift” of the GST revamp during his Independence Day speech on August 15, adding on Sunday that it would make for a “bachat utsav” (savings festival), coinciding with the start of Navratri. The spending spike, expected to run through the festive season, is seen bolstering India’s growth amid global uncertainty owing to tariff challenges and geopolitical conflict.

“The response from customers has been phenomenal—something we haven’t seen in the last 35 years,” said Partho Banerjee, senior executive officer, marketing and sales, Maruti Suzuki, India’s largest carmaker. “On the very first day (September 22), we recorded 80,000 enquiries, and have already delivered over 25,000 cars, with deliveries expected to touch 30,000 shortly.”

While automakers and large electronics chains saw early signs of demand, it was business as usual for most fashion and grocery retailers. Companies said there could be a broader pickup in spending ahead.

Specific segments gain
Flipkart and Amazon kicked off their festive sale events on Monday for loyalty programme users, with sellers and brands reporting strong early traction boosted by the GST cut. Fashion brand The Pant Project saw a 15-20% jump over last year, while Shadow Etail, a seller on both marketplaces, saw traffic in the home essentials segment surge 151% from last week.

“The revision is very favourable for mass fashion, which now attracts only 5% GST and is seeing strong demand. But premium and occasion wear have moved from 12% to 18%, which is weighing on sentiment in that segment,” said Sidhant Keshwani, founder and chief executive of apparel brand Libas.

The GST revamp involves the scrapping of the 12% and 28% slabs, retaining the 5% and 18% levies. Demerit goods attract 40% GST. Most items of daily use are now at the lowest slab or at zero GST.

Autos accelerate
GST has been cut to 18% from 28% plus cess on sub-4-metre cars.

“Demand for small cars has been especially strong, with bookings growing by nearly 50%,” Maruti’s Banerjee said. “Enquiries remain very high, and we may even run out of stock for certain variants.”

The start of Navratri, amplified by the momentum from GST 2.0 reforms, has infused strong positivity into the market, said Tarun Garg, whole-time director and COO, Hyundai Motor India. “On Day 1 alone, HMIL recorded around 11,000 dealer billings, which is our highest single-day performance in the last five years,” he said. “This is a clear testament to robust festive sentiment and customer confidence… Looking ahead, we anticipate sustained festive demand.”

Electronic stores posted their usual sales numbers, although enquiries went up. Most stores had beefed up sales staff in sections such as televisions and air-conditioners—GST on them is down to 18% from 28%—expecting increased footfall. Stores were also festooned with GST price cut promotional material.

Kamal Nandi, head of the appliance business at Godrej Enterprises, said people are expected to visit shops in the evening and on weekends, even in the smaller towns. “In fact, we expect this weekend to be a big one as it is just before Dussehra,” he said. That’s also the expectation at the Tata-owned Croma consumer electronics stores. “We are expecting footfall to go up significantly in the coming days,” said a store manager. He said the store is targeting a sales increase of more than 20% over last year’s festival season.

While brands are betting on the timing—the festive season traditionally sees a sales bump—fashion and grocery chains including DMart, Pantaloon, and Reliance Smart Bazar were focused on updating systems and pricing throughout the day to account for the new GST rates.

V-Mart, which largely operates in small towns, said the full impact of the GST cut would become clearer as the festive season gets underway. “The objective is to drive consumption,” said V-Mart chairman Lalit Agarwal. “We are seeing early movement in some categories, but the real test will come in the weeks ahead as people save on high-ticket items."

Price tags
Staff at several locations said revised price lists continued to arrive late into the afternoon. Consumer awareness of the tax changes also appeared limited.

“I assumed there was a festive offer,” said Chandrima Sen, a shopper at Reliance Trends in Kolkata. “I didn’t know this was due to GST cuts.”

Manoj Arora, owner of Samrat grocery store in Gurgaon, said it’s selling old stock at new GST rates based on updated price lists, but doesn’t expect higher demand as essentials are need-based and compensation from companies will take months, impacting working capital.

However, several kirana stores in east Delhi markets said they are selling at the price printed on the packet. “I am selling at MRP (maximum retail price) that is printed on the packet of each SKU (stock keeping unit),” said a kirana store owner in Mayur Vihar Phase 1, reflecting a common trend among small traders who said they had not received revised price lists from suppliers yet.

Dairy brands reported a smooth transition. “We had been preparing for the past two weeks,” said Manish Bandlish, managing director of Mother Dairy. Amul managing director Jayen Mehta said increased sales were driven by seasonal demand due to Navratri, as milk, curd, and buttermilk were not impacted by GST changes.

In fashion retail, implementation was slower. Zudio outlets in Bengaluru had only partially updated pricing. Shoppers Stop put up banners to absorb additional costs on private-label garments priced above Rs2,500, but other fashion brands from Mango to Calvin Klein had higher tags than the day before.

In Chennai’s bustling Pondy Bazaar, Planet Fashion, which sells the Peter England and Van Heusen brands, marked select apparel with green dot stickers to indicate GST rate cuts, drawing Navratri shoppers looking for festive deals. While larger footwear chains such as Mochi and Bata passed on GST benefits on old stock, smaller stores held firm on pre-revision pricing.

Smaller players like Dharani Footwear have taken a call to finish selling their old stocks at the pre-revision rate and only the new stocks at the revised GST rate. “We have already paid the GST on those items so how can we sell them at the new prices," said a salesman at the store. “We even had a customer come in the morning asking for a particular orthopaedic footwear brand for which the price has come down but we told her we cannot give her the GST benefit till we finish old stocks. We might lose some customers but these are the only products that we earn some margins from so we have no choice."

Ecommerce push
Direct-to-consumer clothing brand Campus Sutra saw a 36% sales increase over the weekend compared to last year. Men’s clothing startup Snitch reported a 40% increase in orders across ecommerce platforms, noting a boost in demand due to the GST cut.

“By moving the 5% slab threshold to `2,500, a wider range of our products now fall under the lower tax bracket which has given a noticeable push to demand,” said Siddharth Dungarwal, founder and chief executive of Snitch