This is what the consumer electronics sector is thinking about GST

GST is a long-term vision and process but a step in the right direction. It is one of the biggest tax reforms that the country has seen since independence. The decision of ‘one country one tax’ is always beneficial for any country. For an economy where the volume of transactions is increasing through the digital mode, this move will certainly result in the increase of the GDP of the country. Although, debatable at this point, the inflation rate is also anticipated to decrease. However, if the inflation rate increases at this point, it will directly affect the consumer electronics industry of the country.

Slow down

Over the last half year, the consumer electronic industry has slowed down significantly due to demonization and will experience a further slow down due to GST. Not just the consumer electronics sector, this slow down just cost India the tag of the ‘fastest growing economy’. The March end growth figures are the lowest since the December quarter 2014. In June 2017, there has been a major slowdown in the manufacturing sector, where output generated is as low as 50%-60%. Most of the manufactures have closed down their plants on 27 June, only to re-open them, post the introduction of GST and attaining clarity on the working of the same.

After-effects

The price of television sets is set go up by 5-6 % from 1st July, with the GST council recommending a 28% tax on the same. Some players in the market have decided to wholeheartedly support their trade partners in this respect, as there will be an excise duty loss that will be faced by dealers/ distributors across the country. A heavy impact on sales for the first few months post GST is expected, but we are optimistic that once the festive season arrives, sales will pick up again.



Government deferring filing of returns



Delaying the filing of returns until September under the GST regime is a smart move, as this will give manufacturers time to settle down into the new format. These two months will be a teething period for everyone so that return filling and other nuances can be understood and are aligned in the system. On the other hand, there are less than a few hours to go before the GST rollout and the government is still clarifying details and working out the implementation as well as deciding on tax rates.

Recently, the government announced deferment of filling to August and September, which raises a concern amongst businesses about the capability of the tax department of handling the implementation and the coordination of the smooth running of the system.

Are you ready?

While all revisions are underway, we feel that the vendors and suppliers are ready for GST. There is certainly a positive attitude towards the implementation in the trade, which is a good sign for the economy. The finance minister has confirmed on 21st of June that GST will roll out on July 1 which puts a rest to the speculation that there could be further delay and we are all geared up and focused for towards the change.

The major concerns are for small scale businesses that may have to recruit people specially for GST. This will not be an easy task since to hire people, one must ensure that they are well versed with the system. Another concern is that from filing a return quarterly, the system will change to filling returns every month which will also amount to extra work as everyone is accustomed to a quarter closing in the country.

Heavy Discount

Currently, there is a lot of panic regarding GST as retailers are hoping to avoid building inventory that they will have to carry forward after 30th June. Bigger companies and brands are offering discounts, some to the tune of 40%, to liquidate their inventory as soon as possible, which poses great difficulty for affordable category brands, like ours. India has a phenomenally large rural market, where there is noticeable fear related to GST and where there is substantial speculation, therefore we have started educating our trade partners about the processes and roll out of GST and the consequences that retail and consumer electronics will face.

Grey market and Tax evasion



If we talk about LED TV’s in the affordable category, the most significant challenges being faced by them are fake products, grey or cash market. We may not discuss it openly, but this is certainly terminating our economy. There is a tax revenue loss of Rs.1500 to 2000 on each 32” set. This parallel market has been generating revenue to the tune of $1.5 billion and is growing at the rate of 25% per annum. As a result, many TV brands have had to shut down their operations in the past. These TV’s are declared at an erroneous rate of duty or at 50% under invoicing, due to the various loopholes in our system. If strict measures are not taken while implementing the GST, it could very well turn around to be the biggest tax loss to the country instead of the biggest tax to reform it.

However, ‘One country one tax’ will lead to single taxation for supply of goods. The opportunity to conduct business will increase as there will be more accessibility to different parts of the country. Due to the multifaceted tax structure, small and middle scale businesses used to hesitate in conducting business deals with big houses or those located outside their immediate periphery.


(This article has been contributed by Avneet Singh Marwah, Director and CEO of Super Plastronics, which is the Kodak TV Brand licensee partner in India)