Indians hit stores in shopping frenzy ahead of new sales tax

New Delhi: At a crowded New Delhi market plastered with posters announcing massive sales, shoppers were vacuuming up household gadgets and high-end electronics in the last days before India's new sales tax takes effect.

The single, nationwide tax starting Saturday replaces a complicated mix of state and federal taxes and will change the cost of nearly everything people buy.

In the Lajpat Nagar market, Nafees Ahmad scoured the stores for a new air-conditioner and LED television set with his wife and teenage son in tow.

"Our TV is fine. We did want to buy a new one, just not this soon," he said with a smile as he checked prices at the Electronics Paradise store.

"But when the GST is applied everything will cost more so we decided to just go ahead and buy it now," he said, referring to the Goods and Services Tax.

He may even splurge on a new oven and a few other items if the prices were low enough, he added.

India has debated such a tax for over a decade. While economists mostly agree a single, nationwide tax will streamline business, there are concerns about how an economy as unwieldy as India's will transition to a system that involves filing monthly tax returns online.

The government published lists last month of how almost every item, from toothbrushes to automobiles, will be taxed at rates of 5 per cent, 12 per cent, 18 per cent or 28 per cent. Businesses were ordered in January to adopt or upgrade cash registers and computers so they could comply with the changes before they took effect.

It was hard for Indian shoppers to know what the cost of almost anything will be come Saturday because prices vary by brand and the current taxes varied from state to state. Refrigerators and air conditioners were among items likely to cost much more; they'll be taxed at the top rate of 28 per cent while the highest tax applied in any of India's states now is 23 per cent.

Officials have promised that the transition will be smooth and painless and will eventually streamline tax collections and boost the economy but for hundreds of millions of mom-and-pop stores where inventories and sales are tracked only on paper the leap is wildly daunting.

Even at large multi-brand retail stores like Electronics Paradise store managers are uncertain about how things will unfold from Saturday as they transition to the completely untested system.

The massive sales preceding the deadline benefit both buyers and sellers. Shoppers get bargains, and retailers avoid incurring fresh taxes on old inventories.

"We want to clear our stocks and bring our inventories to zero so that we don't have to pay new taxes on existing goods," said Anuranjan Thakur, manager of the Electronics Paradise store in Lajpat Nagar.

Over the last week Thakur said that sales at his store had increased five-fold.

"From 40-50 invoices a day we are up to 250 a day. Footfalls on weekdays are like the weekend."

The store that usually shuts at 9 pm has been staying open until 11 pm every night this week.

"This is just like Diwali sales," he said. The Hindu festival of Diwali, dedicated to the goddess of wealth, is a weeklong shopping frenzy.

But not every shopper went home with the goodies their hearts desired.

Office worker Muzaffar Ahmed took off half a day to shop for a washing machine and refrigerator with his wife and twin toddler boys. But by late Thursday evening he hadn't found anything.

"Everything is sold out. We're too late," he said as he looked at the last few washing machines on display.