X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GST Triggered Sales - It's Time To Protect Your Financial Well-being - Outside View by PersonalFN
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

GST Triggered Sales - It's Time To Protect Your Financial Well-being
Jul 3, 2017

Stock Clearance Sale!

Pre-GST Sale!

The Great Indian Sale!

The Big Billion Day Sale!

Different tag lines, all of them for one purpose --- stock clearance before the July 01, 2017.

If you visit a shopping mall or a well-known online store, there are sales running showering discounts and offers. Along with usual monsoon season sales, shops are gushing with customers frantically trying to get the best discounts.

Wondering why there are so many sales these days?

The urgency of this phenomenon is because of the Goods & Service Tax that will roll out over this weekend. With the implementation of this transformational tax structure, there is an unvoiced concern that the prices of most commodities are set to increase.

Let us dig in deeper and understand how GST is going to affect the profits of the producers/companies of any good or a service provider.

Maximum Retail Price (MRP) is the price you pay for the product inclusive of all the taxes. The MRP needs to be justified factoring in the total production cost and profit margins. And this needs to be approved by the regulatory body formed under Legal Metrology Act, 2009.

Once the product has been dispatched from the manufacturing unit/warehouse, the MRP cannot be changed as per the company's convenience. There is a set procedure and number of approvals required.

In current scenario, with GST coming into play, companies are left with two options:

  1. To tweak their MRP; or
  2. Sell the products at same price (inclusive of new tax rates)

Option one is lengthy and time consuming where the producers can't rationalize their hike in MRP.

And in the case of option 2, companies will have to sell their products at the same MRP, but will be charged a flat GST rate and this might affect their profits.

Hence, there is hullaballoo and frantic stock clearance everywhere.

In this article, we have highlighted the frequently purchased goods and products such as electronics and apparels and some points to keep in mind before you hop to a shopping mall.

Electronics

Wants are unlimited and nothing can quench this thirst. Electronics retail stores have declared heavy discounts on their range of products and this has shown an uptick in their sales number.

But do not get carried away with the air conditioners and refrigerators that are being sold at a discount rate of 40% - 50%. Buy these only if you need it! Remember though the purchase price is low, the additional costs like its maintenance, power consumption, etc. might burn a hole in your pocket in the near future.

But, if there are certain things which you wish to purchase and they are presently on heavy discounts, then you must not let this opportunity slip off. For instance, if you were planning to buy a TV set, refrigerator, washing machine, or air-conditioner during Diwali sale you should probably make the best of the ongoing sale.

Please note that indulging in a shopping spree just for the sake of it can harm your long term financial health.

Apparels

Most of the apparel stores have adopted several strategies to entice customers. There are large hoardings outside the store stating 50% discount offers. However, if you look closely at the fine print, they prefix "upto" to the alluring discount. Naturally, this means not all stocks inside the store carry a 50% discount; the slash in prices are limited only to certain items.

Remember that, while shopping during a sale is not a bad thing, it must be undertaken only if you genuinely need to purchase things and not merely because they are available at a discount. For instance, shops might have offers such as "buy 3, get 1 free". You could buy 3 things, just to get that 1 thing free, irrespective of whether you even need those 3 things in the first place. If you buy something just for the sake of it, without assessing your needs, there are chances that you won't actually use it later, resulting in parking your money into unnecessary goods.

Points to remember:

With the GST rates being implemented does not mean that the world of fair prices is ending here. Consider this:

  • Rationally assess what things you really need vs. things you want
  • Have a budget in place for each item, say apparels, home appliances & decor, gadgets, gifts, etc. and follow it religiously when you venture out shopping
  • You could buy things you've vied for during sales/ offers, but ensure that you get the best bargain and read the fine print.
  • Avoid buying things you do not need in the near future
  • Avoid converting large purchases on your credit card to EMIs
  • Redeem reward points accumulated on credit cards to buy things that can effectively help you preclude a cash outflow
  • Pay your credit card dues in full and on time

PersonalFN is of the view that, as much as earning good returns on your investments is important to you, curtailing avoidable expenses too is important. End of the season and stock clearance sales will continue year after year, but spending more means you will probably save less and invest lesser. Such frivolous choices can damage your financial health in the long run. It is imperative that you first save to achieve financial security and then spend on lifestyle and leisure. This does not mean sacrificing all your wants and desires, but it does mean that you must plan for them in a prudent manner. We believe that if you chart an appropriate financial plan and be determined to follow it, you will not only be able to achieve your financial goals but also enjoy a comfortable quality of life.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.

Disclaimer:

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "GST Triggered Sales - It's Time To Protect Your Financial Well-being". Click here!

  

More Views on News

How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

Jun 10, 2017

Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

Aug 17, 2017

Mr Trump is in the White House and the gods are in their heavens; what's not to like?

Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

Aug 16, 2017

All across the country, the old gods become devils. New, gluten-free gods take their places...

This Company Beat the Business World's 'Three Killer Cs' (The 5 Minute Wrapup)

Aug 16, 2017

And what it has in common with beating the stock market too.

5 Steps To Become Financially Independent (Outside View)

Aug 16, 2017

Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

More Views on News

Most Popular

Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

Aug 7, 2017

The data tells us quite a different story from the one the government is trying to project.

Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

Aug 4, 2017

The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

Aug 8, 2017

Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

Signs of Life in the India VIX(Daily Profit Hunter)

Aug 12, 2017

The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

Aug 7, 2017

Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

More

Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Aug 17, 2017 02:02 PM

MARKET STATS