The Central Board of Excise and Custom's move of implementing excise on MRP
of all IT products on January 25, has left the IT industry in a state of disquit.
While few vendors have already increased the prices of their products others are
in a wait and watch mode. According to sources from the industry, Logitech has
hiked the prices of their products by five to six percent. HP on the other hand
already increased its prices in January to eight percent. Intex increased its
prices this month to eight percent. However, vendors like Canon, Zenith, Lenovo
and Sahara are waiting for the government to peep into the situation and are
currently in discussion with senior managers in the industry before they take
their step.
Mixed reactions
Talking about the hike, Rajnesh Sinha, Business Manager-Peripherals, Intex
said, “Earlier the duty was charged on the invoice but the government has
changed the model and will now be charging duty on the MRP of the product with a
rebate of 25 percent. This means that the margin between the dealer costing and
the MRP will decrease further. This high MRP will affect system integrators and
LFR the most while the dealers and the resellers' business will also be affected
to a considerable extent. In the process the end-consumers will get maximum
benefits.”
Clarifying further Sinha stated, “LFRs and dealers used to put the MRP of
products at a slightly higher price in order to earn their share of margins.
With the government implementing duty on MRP they will have to now lower the MRP
or else they end up paying more duty on the same. Thus customers are in an
advantageous position as they will get products at a reasonable price.
Intex has rationalized their price so that the channel does not get deeply
affected. While they have lowered the MRP of their high-end products to the tune
of 10 percent, in the lower segment the company has decreased it to 30 percent.
Subroto Biswas, Country Manager, Logitech India said, “We have tried our best
to hike the prices of Logitech products to a minimal level so that the channel
do not have to bear the brunt of the price rise. For our peripherals we have
hiked it in the range of five to six percent.”
Amit Kedia, MD of Delhi-based Sree Sagrmatha Distributors and owners of
Tech-Com brand stated that this step by the government would impact their
business to a large extent. “The channel already keeps cribbing about the margin
issues and this will decrease their margins further,” he added.
Puneet Datta, Senior Manager Marketing-Business Imaging Solutions, Canon
stated, “We are currently in the process of evaluating and don't want to
increase the prices immediately. The government is offering an abatement of 25
percnet as of now and we are aligning with senior managers in the industry and
CII to approach the government. With the budget round the corner the government
is not looking into the matter seriously. We want to explain to the government
officials that the move is not logical. We will hike the prices only after we
have reached a level of agreement with the government.”
Ashish Taneja Director of Bhopal-based Galaxy Company and dealers of zenith
products stated, “We haven't received any notification from Zenith as far as the
hike is concerned, as the company is currently in the process of monitoring the
situation and factoring the prices. This hike is hitting the importers both from
the excise front as well as owing to rupee appreciation.”
George Van Dan Merwe, COO, Sahara stated, “We are waiting for the budget to
be out and the moment it is out we will be hiking the prices of our notebooks in
the range of one to three precent. This hike will be higher for high-level
products and reasonable for the entry-level products.”
LFRs: Most affected
However, in this entire exercise, LFRs will be the major sufferers. Talking
about the same, Delhi-based sub distributor, Sunny Puri of Delhi-based Computer
Empire opined, “Till date it was FMCG products that were subjected to duty and
there was no definite rule for IT products. This hike will not affect the
dealers as much as LFRs as they (LFRS) were selling the products at unrealistic
prices.”
Ashwini Agarwal, Country Manager-IPG, HP said, “We increased the prices of
our products on January 12. This hike will affect LFRs the most.”
Stating the government's move as unjustified Subram Natrajan, Chief
Energizing Officer of Mumbai-based Sam7 Computers and Networks stated, “This is
an attempt to take money away from the IT industry. As it is the margins were so
low and this hike leaves us nowhere. The retail segment will be affected the
most as they used to sell it at an even higher price than the MRP.”