GST 2.0: Should you put your shopping on hold till September 22?

Experts favour waiting for the new regime to come into force.

“Legally, from September 22, invoices must reflect the revised GST rate. Retailers can’t charge you the old rate even if their distributor arrangements are pending,” said Hardik Gandhi, partner, indirect tax, Deloitte India. “The government has also said it won’t invoke anti-profiteering rules aggressively but expects companies to pass on benefits directly to customers. So, if GST drops by 10 percent, consumers should see that reduction in final prices.

Abhishek Jain, partner and national head, indirect tax, KPMG in India, agrees, "Yes. Any sales made till September 21 will attract the current rates. From September 22 onwards, sales will attract the lower rates," Jain said.

The timeline signals the government’s intent. Prime Minister Narendra Modi first announced the GST overhaul plan in his Independence Day speech on August 15, giving industry the time to get ready for the change.

Typically, rate changes announced by the GST council take effect within days of notification. This time, businesses have nearly three weeks to prepare, as the scale of the change is huge and affects many more sectors than usual.

Businesses need time to update IT systems, billing software, and point-of-sale machines across retail and e-commerce platforms.

The unsold stock dilemma

But what happens to products already lying with dealers and distributors? Manufacturers may have invoiced them at the old 28 percent. From September 22, they can only sell at 18 percent; that 10 percent gap has no easy fix.

Manufacturers would have sold inventory to distributors at the higher GST rate. From September 22, retailers can only bill customers at the lower rate.

"Refunds under the inverted duty structure won’t be available for such rate transitions, according to the latest government circulars. That makes this a grey area. Some companies may compensate dealers, others may absorb the cost, while a few could try to adjust it through margins,” Jain said.

Distributors are also wary. Stocking up now could mean losses later. For instance, an AC priced at Rs 20,000 at present attracts 28 percent GST. If the distributor sells it after September 22, when the tax drops to 18 percent, they lose 10 percent unless the manufacturer offsets the difference.

“This is creating some hesitation. For non-essential goods, distributors are waiting until the new rates kick in. For essentials like medicines or food, demand is inelastic; you can’t postpone buying bread, butter, or life-saving drugs until September 22. Regulators will also ensure there’s no scarcity in these categories,” Gandhi said.

For daily essentials, the impact will be less dramatic, though lower prices should trickle down from September 22.

Essential food items remain tax-free, while products such as ghee, dry nuts, condensed milk, sausages and namkeen will be taxed at 5 percent, down from 18 percent.  "As for MRP, remember it’s the maximum retail price. If GST has been reduced, companies and retailers can choose to pass on the benefit by selling below MRP. For example, if MRP is Rs 112 (including 12 percent GST), and GST drops, the same product can be sold at Rs 105," Jain said.

If it is a high-value purchase and you can wait, patience may pay off. For non-essential items, where the overall impact on your monthly bill is not significant, you can shop as usual.