Discusses pricing formula and other fees, value-added tax (VAT), etc.
Last Published: 10/10/2018

In July 2017, India implemented the Good and Services Tax (GST), a national VAT system, to unify Indian states into a single market and improve the ease of doing business.  The GST is designed to simplify the movement of goods within India. There are four level of GST rates – 5 percent, 12 percent, 18 percent and 28 percent, with highest rates applied to luxury items.
When formulating key strategies and making decisions about product pricing for the Indian market, it is important to remember that simple conversion of U.S. dollar prices to Indian rupees will not work in most cases.  Also, the assumption that a latent niche market for premium products exists has often resulted in low sales volumes and negligible returns for some foreign companies.

If the product can be imitated easily in terms of quality and service, international pricing will not work in India.  To reduce product import duties or other local costs and ensure a stable market share, several U.S. and other foreign companies have set up product assembly in India.

Pricing decisions also have some bearing on product packaging.  Many consumer product suppliers have found it helpful to package smaller portions at reduced prices rather than "economy" sizes.  Although some Indian consumers are aware of quality differences and insist on world-class products, many customers can sacrifice quality concerns for price reductions.

Bargaining for the best price is a routine process for the buyer and seller in India.  For consumer goods, especially for durables, the sellers often give discounts on the listed prices during holiday seasons to attract more customers.  Trade-ins of old products for new items are also increasingly popular among consumers.  A pricing strategy must consider all these factors.

Another key consideration in pricing is Indian import tariffs.  These are high for most products, especially consumer products.  There are pockets of affluent Indians who can afford to buy a variety of luxury branded goods.  However, in general, consumer consumption patterns are very different from those in many other countries.  The middle class is growing exponentially, providing a fertile market for moderately priced items, but the prohibitive import tariffs may serve to move some items out of the reach of the Indian middle-class consumer. 

For the most current information on GST implementation, please see https://cbec-gst.gov.in/ and http://www.gstcouncil.gov.in/ .

 

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India Trade Development and Promotion Cost and Pricing