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Festive Sales Has A GST Problem
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Good Morning. India's festive season usually runs like clockwork; between Ganesh Chaturthi and Diwali is the peak, and the most important time of the year for Indian retailers. This year, however, the Goods and Services Tax (GST) announcement has become a bit of a jammer. Retailers are unable to roll out their usual sales, as they wait for clarity. On the other hand, experts warn that a GST cut may not speed up slowing consumption.
In other news, Prime Minister Narendra Modi, Russian president Vladimir Putin and Chinese president Xi Jinping make a show of solidarity in China. Meanwhile, ChatGPT maker OpenAI plans data centre in India.
DECODE THE NEWS
The Unopened GST Diwali Hamper Creates Hurdles For The Season Of Discounting
What?
Weeks before Prime Minister Narendra Modi announced that the four Goods and Services Tax (GST) slabs will be collapsed into two, many retailers were hoping to offload piled-up inventory through discounts. The government’s promise of GST rationalisation with details that are expected to come around Diwali — a rollout only in September — has put these plans in disarray.
Take autos, for example. Dealers were offering discounts of Rs 40,000 to Rs 1 lakh on older passenger vehicles models to move inventory, before the announcement. This was especially after July auto sales fell by 4.3%, as per FADA (Federation of Automobile Dealers Associations). Now, of course, most analysts are questioning the quantum of discounting.
Why?
The sales season has already been truncated, as people wait and watch for the final details of GST reform. India’s festival sales season kicks off in the first week of August with Raksha Bandhan, traverses through Ganesh Chathurthi later the same month, peaks during Dusshera and Diwali, which fall anywhere between late September and early October and ends with the grand finale in December — the winter months bring more cheer as it juxtaposes with the wedding season as well.
Retailers across sectors are now holding on to goods, messing with the supply chain. White goods, especially fans and ACs, have had a particularly bad run this summer because of the early onset of the monsoon.
“This issue is even more challenging for retailers and dealers. With many already holding higher-than-average inventory, which was purchased at the prevailing, higher GST rates, any delay in consumer purchases would result in a direct revenue hit,” said a report by Ambit Capital.
Ideally, the GST reduction benefits have to be passed on to the customer. Yet, there is more haze than clarity without the final brass tacks. At the very least, some of these originally intended discounts could also be rolled back — even as inventory for slow-moving models accumulates with dealers.
“The GST rate rationalisation exercise is likely to be successful only if the rate cut is passed on entirely to consumers. If original equipment manufacturers (OEMs) look to absorb part of this benefit in the form of a reduction of discounts, etc., then the full benefit of this move will not be visible. Hence, it remains to be seen whether the government reinstates the anti-profiteering mandate, that has already expired, post the proposed GST rate cut,” said Motilal Oswal in a recent report.
What Next?
Still, experts warn that GST will not cure the demand slump. The post-Covid sales rush was an unusual demand peak — that has long since gone off steam.
“Pent up pandemic demand is surely over. Revival will take another 12-15 months as we are not seeing consumer capital purchase cycles reviving yet. Auto is a high-value purchase and revival is tightly correlated with economic growth,” said Madhur Singhal, managing partner, consumer and internet at Praxis Global Alliance.
As they wait for clarity, to discount or not to discount — that’s the question chasing retailers this festive season. .
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CORE NUMBER
Rs 1.86 lakh crore
This is how much India collected as Goods and Services Tax (GST) in August — 6.5% higher than the same month last year, but lower than the previous month in 2025, which was Rs 1.96 lakh crore, according to government data released on Monday. Net GST revenue stood at Rs 1.67 lakh crore, up 10.7% year-on-year.
The Backstory: Collections hit a record Rs 2.37 lakh crore in April 2025, but August data shows a slowdown. Domestic revenues grew 9.6% to Rs 1.37 lakh crore, while GST from imports slipped 1.2% to Rs 49,354 crore. Refunds fell sharply by 21%.
What’s Next: As per Business Standard, India plans to cut consumption tax by at least 10 percentage points on nearly 175 products, ranging from shampoos and hybrid cars to consumer electronics. The GST Council is also expected to meet from September 3-4 to discuss rate rationalisation and possibly moving to a two-slab structure (5% and 18%), The Economic Times reported. PM Narendra Modi has promised next-gen GST reforms by Diwali, with “substantial” tax relief for households and small and medium enterprises (SMEs).
FROM THE PERIPHERY
A New World Order Emerges?
India and China are partners, not rivals, said Indian PM Modi and Chinese Premier Xi Jinping on Sunday at the SCO (Shanghai Cooperation Organisation) Summit in Tianjin in China. Modi announced that India was committed to improving its relationship with China. Jinping reiterated the sentiment, adding that they must not let the “border issue” dictate their overall dynamic.
Setup: The China-India relationship deteriorated after a deadly border clash in June 2020. Since then, India has restored flights to China and even restarted the Kailash Mansarovar Yatra. The change in the relationship also comes at a time when India is faces with massive tariffs imposed by president Donald Trump on India.
Pivot: Modi also posted jovial pictures with Russian leader Putin–just days after the US levied a hefty 50% tariff on Indian exports saying it funds the Russian “war machine.” But, India disagrees. In an op-ed in The Hindu, Petroleum Minister Hardeep Singh Puri denied the accusation that India is Russia’s “laundromat.” Instead, he argued that India has helped stabilise global oil prices.
OpenAI’s India Foray
OpenAI is building a data centre in India, according to sources Bloomberg spoke to, and CEO Sam Altman will likely make the announcement later this month. Two weeks ago, OpenAI launched a cheaper paid version of ChatGPT, titled ChatGPT Go, specifically for India. Altman has previously spoken of India being the company's second-largest market, and this cheaper version costs Rs 399 per month, versus ChatGPT Pro, which costs Rs 19,900.
Catch Up Quick: OpenAI’s expansion comes at a time when the US and India are at crossroads because of US President Trump’s steep tariffs.
Flashpoint: Unlike the US and China, India doesn’t yet have an “OpenAI-scale” company, but it is building its own AI models, infrastructure, and ecosystem, with a strong focus on Indic languages and affordable AI. For instance, there’s Sarvam AI, Krutim, Karya and Reverie Language Tech, but experts say that India is farther behind in the AI race.
SC Dismisses E20 PIL
India’s Supreme Court has dismissed a PIL (public interest litigation) by lawyer Akshay Malhotra demanding a probe into how safe E20 is for automobile engines. The PIL also asked the apex court to ensure that petrol pumps sell E0 and E10 petrol alongside E20 and that they clearly label each of the three. But, a two-judge bench said they weren’t “inclined to entertain the plea” and dismissed it right away.
Setting: The Core’s The Signal Daily recently covered this issue: the Indian government introduced ethanol as it helps India become more energy-secure and because India’s farmers gain more revenue by growing cash crops like sugarcane. That’s also what Attorney General R Venkataraman argued in defense of the government.
Turning Point: But, consumers say they have experienced a significantly lower mileage after the rollout. They are also worried about potential engine damage. In several statements, the Petroleum Ministry dismissed these complaints as baseless accusations.
PODCASTS
Markets Start September On A Strong Note
On Episode 666 of The Core Report, financial journalist Govindraj Ethiraj talks to Dr Deborah Elms, Head of Trade Policy, Hinrich as well as Rajesh Cheruvu, Managing Director & Chief Investment Officer at LGT Wealth India.
Markets start September on a strong note. Will they hold?
Have the markets absorbed the tariff shocks, where is the bottom?
September rains last longer and higher than average as well.
How is Asia navigating the post Trump tariff world?
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