/dqweek/media/agency_attachments/JNb31gQnqJvAm0jqPxaV.png)
Follow UsThe
hike in
rate on IT goods in Maharashtra from four to five
percent came into effect from April 1 onwards and while this will not
have a major impact on the dealer business, the proposed hike in
octroi rate in Pune is being seen as an added burden for dealers
here. Talking about the impact of the hike in VAT, Mumbai-based DC
Infotech's Chetan Tinbadia said, "The overall effect will not be
major but there will be an increase in prices, and sales in the month
of April will get affected but eventually things will be back to
normal. Dealers may have to absorb this hike if they want to get
business in the short term." Nikhil Murarkar of Navi
Mumbai-based Ross Computers agreed, "The dealer's margin may
have a slight negative impact but principals can offset this buy
reducing the prices so that customer demand remains." Other
dealers who feel
will not
make a difference include Ganesh Pagay of Nagpur-based ICIS Computers
India and Nsys Computer Systems' Manish Lotwala from Jalgaon.
"A one percent hike in VAT will not make any difference to our
top line numbers," said Lotwala. "If the rate is hiked, the
prices will be reduced and this is a normal phenomenon in the IT
industry so any effect will be nullified anyway," explained
Pagay.
On the other hand,
in Pune not only have to deal with the
increase in VAT but also with the proposed hike in octroi from three
to four percent, which is due to come into effect shortly. This has
not sit pretty with quite a few dealers in the city who also feel
that this can encourage people to evade octroi and bring in goods or
even buy from outside the Pune Municipal Corporation (PMC) limits
from the Pimpri-Chinchwad Municipal Corporation (PCMC) where the
octroi rate prevalent is 2.5 percent.
Prakash Chauhan of Karan Solutions quantifies the kind of impact that
the twin hike in VAT and octroi can have on his business. "I
feel that the impact on my business can range anywhere between 10-20
percent with the increase in these rates. This can also increase the
possibility of octroi evasion affecting the business of those who pay
for octroi legitimately," said Chauhan. Adapt Computers' Amit
Deo shared, "Not only is the price bound to increase, it will
also spur on people to buy from outside the octroi limits."
Nilesh Gujrathi of Monarch IT, agreed, "The hike in octroi rate
can cause customers to buy from outside PMC octroi limits from say
PCMC where it is cheaper however the transportation cost may offset
this advantage if it is not a bulk purchase. Customers may also defer
decision to buy now." Laptech India Solutions' Ashwin Sanghvi
also felt that customers would prefer to wait for sometime before
buying. "I feel customers will put off their purchase decisions
in a short term as a result of the increase in price that will occur
due to the raised tax and octroi rates," said Sanghvi.
Santosh Israni of Raunak Computers voiced his concern about the
viability of doing business. "The government makes more money
than us partners. Our margins are at two-three percent while
government takes about four-five percent if not more. I do not know
how I can survive in the long run if things are like this in addition
to the intense competition in the market. With both VAT and octroi
going up by one percent each, this is an overall two percent increase
in the price. For a product like a laptop, this can be as much as a
thousand rupees up in price which can cause customer demand to come
down. I expect business to be impacted adversely by 30-40 percent,"
expressed Israni. Solutions India's Chandresh Vithlani said,
"Unfortunately Maharashtra is the only state that levies octroi
in addition to VAT. Instead the state should learn from Gujarat where
octroi was removed but to offset that, the government there raised
the VAT from four to five percent. Here on the other hand, not only
are they increasing VAT rates but also plan to hike up octroi as
well. A two percent hike can be significant on a PC and this is not
the right move if they want to encourage PC penetration in a country
where it is still low. I feel the price rise will discourage many
middle-class families from buying a laptop or PC. If demand is going
to drop by 20 percent as a result of this then it will nullify the
actual revenue the government was expecting to earn from the hike.”
KK More of General Computers said, "The hike will be passed on
to the end-user thereby impacting the demand and also the effect on
channel prices will be seen early this month as a result."
Finally, at an extraordinary general body meeting held on March 18 by
the local IT association, Computers and Media Dealers Association
(CMDA, Pune), it was decided that they would take up the cause with
the city's municipality body. "We had earlier made a
representation to PMC regarding the initial proposal to hike the
octroi rate from three to seven percent where we threatened to go on
a strike. The proposed hike is now limited to just one percent and
while we will not strike over this matter, we will definitely
continue to lobby with PMC to ensure that there is no future proposal
to hike this over and above the one percent increase," said
Lalwani, President, CMDA, Pune.