0% VAT in J&K creates unhealthy competition in Punjab

The recent announcement of 0% VAT on most of the IT products in Jammu and Kashmir, must have brought a cheerful wave for valley partners, but on the flip side, the state government decision has started creating disturbances in the neighboring markets like Punjab or to little extent, Delhi too.

Partners in Amritsar, Ludhiana, Jalandhar and Bathinda have complained about disturbance of MoP in their market and raising of unhealthy competition amongst the dealers.

Speaking on this issue, Ankur Gupta, PRO of Ludhiana based ACE lamented, "Due to 0% VAT in J&K, lot of material is being billed there (J&K) and entering Punjab with and without bill. Even, end customers are doing direct invoicing. Hence, it has been creating adverse impact on distribution and retail as well as online sales too. As Punjab partners are opening office in Jammu and catering online sales to almost all India at 0% from there."

Agreeing to Gupta, Bathinda based Varinder Bansal, president, BCPA commented, "The 0%VAT imbroglio in J&K is continued to plague our IT market in Bathinda, mainly the unorganized partners have now started getting the bulk material from Jammu with or without billing, and involving into price undercutting. If we compare the laptop price in Punjab, which we are selling with 6.05% VAT, is Rs 1800 costly than J&K market. There is price war in our market and our margins have gone for toss."

The same situation is prevailing in Amritsar, where partners shared their apathy on the issue during the recently held DQWeek Tech Caravan in the city. Vikas Narang, president, Amritsar Computer Dealers Association(ACTA) added, "Our Amritsar market is stricken with slowdown, ever since 0% VAT has been announced in J&K. As Amritsar is very close to Jammu market distance wise, therefore, end customers preferred to go to Jammu or buy in black market without asking for bill from the dealer just to safe few bucks."

Jalandhar based, Puneet Dhir, general secretary, JCDA said, "This recent development has certainly affected our business in many ways. Material from Jammu is being pushed into Punjab at cheaper rates which partners buying from Punjab can't match. Due to excessive billing from J&K partnersgoods' demand and volume have gone up, due to which they are able to negotiate better base prices, leave alone tax."

Also, partners in Punjab have set up billing offices in J& K to take the benefit of taxation and are buying all the requirements from there. Hence the Punjab government is loosing huge revenue and business. Even online sellers have started to ship material from J& K since buying and shipping from there is cheaper than other states. The box movement of branded products have shifted to online stores or unorganized sector procuring from J&K without bills and selling in Punjab.

Dhir also pointed out, "Partners working in organized segment are at maximum loss as they are not able to match the competitive prices and also don't want to buy without bill. If this continues for another 6 months, partners in Punjab will be forced to shut their shops."

However, when The DQ Week contacted Jammu partners, they had a different story to share.

Naveen Gupta, joint secretary, Jammu Computer Traders Association(JCDA) said, "We are aware of cross territory encroachment threat coming from Punjab. More than 25 Punjab IT partners have set up their branches in J&K to avail 0% VAT benefits in past 2 months, and are supplying goods from here to Punjab. Moreover, our association has requested the state's sales tax department not to get Punjab companies registered locally. Additionally, we are educating our members to not to deal or sell the materiel to Punjab partners in bulk, as this trend will not give long term benefit to our geography and partners. So JCDA wants Punjab partners should not misuse or cheat end customers and J&K partners."

To do deal with the current situation, even the IT companies have increased their product prices by 4-5% in J&K, to discourage cross territory encroachment.

At present, states are charging tax at different rates on various IT products. Not only industrial and commercial goods, the rates are different for essential commodities too, making the situation worse both for traders and consumers.

Even partners from Shimla will be demanding from its upcoming government to waive off VAT in the capital, as Shimla shares same topography like J&K. Anil Sharma, secretary, Shimla IT dealers Association said, "Following the footsteps of J&K IT association, we are talking to Himachal Pradesh partners to form joint action committee and bring 0% VAT in the state as well."