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Follow UsThe difference in
tax (VAT)
rate, applied in various states of India, is making channel partners
and traders dealing in volume business confused and worried.
Recently, the Delhi government had increased the VAT from four
percent to five percent, in lieu of increasing the revenue
collection. Following the same, Punjab government also decided to
increase the VAT rate to five percent. A public notice issued by the
Excise and Taxation Department of Punjab stated that the VAT has
increased by one percent on Schedule 'B' goods (other than declared
goods) given under Punjab VAT Act 2005. Also, in states like
Maharashtra, VAT is imposed at four percent, but the dealers have to
pay an additional Octroi duty.
Giving his view on the sudden increase
in VAT rate, Rajiv Khanna, a member of Jalandhar Computer Dealer
Association said, “The government is well aware of the fact that
maximum dealings take place during the end of the month. As, they
would earn more money from taxes, they deliberately did this instead
of implementing it from the beginning of February. It would have
avoided many confusions.”
Sharing his thoughts over the
difference in tax structure in different states and the impact of
Octroi on regular traders, Gajesh Agarwal of Akola-based Golden
System said, “The product margin growth has been effected badly, as
there is also a major difference in the pricing of the product. There
are many non-VAT locations in Maharashtra, where the billing is done
for products like Intel, which creates a competition for us. The
other major concern for us is Octroi, which according to me should be
banished from Maharashtra. It would be appreciated if the government
demolishes Octroi as soon as possible.”
VAT is applied at four percent on IT products (except for the states
where it has increased to five percent), but products like battery,
laptop bag and monitor attracts 12.5 percent.
Arun Padmawar from Akola-based Sigma
Computers and Peripherals said, “There is a major difference in the
purchase and selling rates which extends to the dealers and the
customers. After the VAT implication, the pricing is increased by the
customers and also we have to appoint a VAT auditor for the accounts.
We also face problems like if there is no Octroi in any city, they do
not take material from our region and this has a direct effect on the
sales. Lots of people are moving out of IT trading business because
of the losses incurred.”
Discussing the situation in
Maharashtra, Amravati-based Mohinder Singh from Genuine Computers
said, “Expenses have been increased tremendously due to VAT in
Maharashtra. The Government had declared that Octroi would be
demolished by March 31, 2010, but I suppose the Mahanagar Palika is
creating hurdles and not allowing the same to be removed, as it is
the only source of income. It has been eight years and still no
action has been taken against Octroi.”
Talking about the East market,
Kolkata-based Pawan Jajodia from Mohit Electronics said, “The
present rate of VAT across Bengal is four percent for IT products.
VAT is charged at every transaction level; like when the vendor
releases the supply to the distributor; when the distributor bills to
the sub-distributor; and this process goes on till the end user
purchases the product. As a result of this, there is a clear cut line
between the price and the total tax in the form of VAT calculated.
Since the complicated sales tax has been done away with, VAT has
proved to be efficient. Talks are on about GST being introduced which
may do away with VAT, however, I think that GST will be implemented
next year in March.”
Though Karnataka is paying four percent
of VAT, but if it comes under the category of luxury goods, customer
needs to pay 12.5 percent. Rajendra Gokhal from Dharwad-based Srishti
Automation said, “The tax in Karnataka is four percent. If its more
or less in other states, it will affect business of those who have
branches across. But if the VAT can be made uniform across India,
then it will help IT trade.”
Partners from North-Indian states have
different view on the difference of VAT rate in the region. While few
opined that it will not have much affect on their business, others
agreed that it can lead to loss of business.
Vipul Garg from Bareilly-based Saviks
Distributors said, “The VAT increase in Delhi can be positive for
Uttar Pradesh. Especially, if you talk about areas adjoining Delhi
such as Ghaziabad, it will be beneficial for the business of partners
there. The small dealers would prefer to buy from a Ghaziabad
distributor as the VAT in UP is half a percent less than Delhi.”
VAT structure in Madhya Pradesh is
proving to be demotivating for the partners in the state. Madhya
Pradesh pays fiver percent of VAT and one percent of entry tax. This
implies that customers have to pay six percent of tax to buy IT
goods. Taking the benefit of the situation, partners in Nagpur have
been dominating the MP market. Partners from Indore complained that
since VAT is less in Nagpur, customers prefer to buy from there and
this creates immense pressure on their sales target.
Partners in Gujarat are facing the
similar problem of VAT difference between their state and
Maharashtra. Bipin Ladumor from Vapi-based Jupiter Automation
mentioned, “The VAT charged in Gujarat is five percent as compared
to four percent in Maharashtra. Since Vapi is right on the border, it
obviously makes sense for a customer closer to Maharashtra to buy
from there than buying from here. With the price being so competitive
in the market, we cannot do much and so in my estimate the impact on
my business in terms of opportunity loss would be to the tune of
anywhere between 10 to 20 percent of total revenue. This is an issue
that is being faced by many dealers based out of Vapi. With goods and
service tax (GST) coming into the picture, we hope to benefit by
increasing our business.”
With so much of confusion prevailing in
the market, partners across the country are hoping that a simplified
GST is implemented soon, so that a uniform tax structure is practiced
for all the products.