Festive season sees surge in premium product sales despite unchanged GST rates

A sweeping premiumisation trend this festive season is benefiting manufacturers of products such as smartphones, refrigerators, laptops, washing machines, and electric vehicles (EVs) despite their goods and services (GST) tax rates staying unchanged.

Companies are attributing this to an improvement in overall consumer sentiments due to income tax slab revisions announced in this year’s budget and the positive effects of GST rate cuts on several other consumer goods such as petrol and diesel cars, and large-screen televisions with effect from September 22.

Counterpoint Research has estimated a 2.3 times surge in sales of smartphones priced above ₹30,000 on ecommerce platforms Amazon and Flipkart in the first three days of the festive sale compared to the same period of last year’s sale. The strong consumer response led the market researcher to raise the festive season sales guidance for smartphones to 11% value growth from 8%.
ET BureauSimilarly, manufacturers said sales of premium models of refrigerators and washing machines are growing at over 30% compared to last year’s Navratri festival. The GST on these products including smartphones remained unchanged at 18% though ecommerce marketplaces and retail chains are offering festive season discounts and other incentives to lure buyers.

The government also kept unchanged the GST on electric two-wheelers and passenger vehicles at 5% though that on petrol and diesel cars saw a significant drop with effect from September 22. Undeterred by the status quo, EV buyers are flocking to showrooms, with sales continuing to grow in double digits, said industry executives. Electric car sales surged 71% year-on-year between January and August, while e-two wheelers grew by 12%.

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“Premium refrigerator and washing machines are growing at 35-40% in ecommerce this Navratri as compared to last,” said Kamal Nandi, head of appliance business at Godrej Enterprises. “There is an improvement in consumption due to overall tax benefits. We expect overall sales growth of 40% this festive season,” he said.

The robust festive season has come as a huge relief for consumer goods makers as demand for electronics, smartphones, and automobiles had been otherwise muted this calendar year. Tarun Pathak, director of research at Counterpoint, said sales growth of premium smartphones led by Apple’s iPhone and Samsung will trigger the highest value sales this festive season after 2021 when there was a spike due to the pandemic. The average discount offered on ecommerce platforms is 34-35% this year, while almost 60-65% of the sales is happening on EMIs, the researcher said.

“However, entry and mid-tier phone sales hardly grew hence our volume growth estimate remains at 4%. We expect offline stores will give a competition over the next 20-30 days by matching prices or bundling gifts,” said Pathak.

Despite the GST cut on petrol and diesel vehicles widening the price gap with EVs, there has been no dent on EV sales which are growing at the same pace, according to Tata Motors and M&M dealers.

A Tata Motors dealer in Mumbai said there is no change in the demand pattern with sales of Nexon and Harrier EVs continuing to be strong. An e-two wheeler dealer in New Delhi said e-two wheelers as a category have matured and buyers tend to look at the overall cost of running and ownership rather than just the initial acquisition cost. “Hence despite no subsidies and price reduction, sales continue to be strong,” he said.

Industry executives said some iPhone models are out of stock on ecommerce platforms, so has categories like large-screen TVs.

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