Liquidation of transition inventory has emerged as the biggest bone of contention among the IT channel partners with GST implementation. While many of the vendors have committed support on the existing inventory till June 30, few are so far non-committal on the issue.
Many partners are pleased with the backend support offered by the vendors. “Most of the vendors have done physical audit of the partner stocks and have committed 6-7 percent back-end. Few vendors are providing excise duty passes to enable refunds. This will enable us to meet our ends,” shared Navin Gupta, Director, Krishna Group.
He added that vendors like Canon and Epson have taken the stocks back and will be providing the SKUs with revised rates. Moreover, they didn’t stress on the targets for June, which was a huge relief for partners.
In fact, many of the vendors allowed partners to keep low inventories. “For May and June, we reduced our focus on fresh sell-in to ensure partners maintain thin inventories. Moreover, we provided excise invoices to the partners so that they can claim refunds to lessen the impact. In fact, almost 80 percent of our partners were able to liquidate their existing inventories,” informed Pankaj Harjai, Director, SMB, Lenovo.
However, partners raised voice against the apathy of few of the vendors. “Vendors like Brother and HP Supplies have remained adamant so far. Due to their non-committal attitude toward our issues, we are facing about 14 percent loss on Brother MFDs and HP supplies. Although HP Supplies sought details of the inventory till June 30, they haven’t communicated anything since then,” retorted Rajesh K Tayal, Director, Computer Touch.
Many partners also alleged that few vendors in spite of offering support to partners increased the product prices. “Vendors like D-Link increased their product basic prices by 7-8 percent and asked us to sell existing stocks on the new prices in order to avoid any losses,” informed Dinesh Sharma, MD, OST Electronics.
However, selling old inventory at escalated prices is not easy. “It would mean selling above the MRP of the old stock, which will be difficult as customers are now quite aware and may raise questions. Ideally, they should have provided back-end support like other vendors,” pointed Paramjit Singh Juneja, CEO, Secant Technologies.
Due to non-committal attitude from few vendors, many partners are facing losses on the aging stocks. “Even if we take a 60 percent refund on CGST and deduct 5 percent VAT, we have a deficit of 7.6 percent if we sell at the same prices (pre-GST prices). In the current competitive environment, it’s difficult to increase prices,” explained Sugreev Singh Ranavat, President, RCTA.
Few of the partners had an inkling of the prospective transition troubles with GST implementation and had maintained low inventories for the last few months. “We had maintained our inventories at just 20 percent of our average levels since January. This enabled us to liquidate all our stocks by June 30 and start afresh with GST. In fact, keeping low inventories didn’t impact our sales and allowed us to rotate money faster,” shared Manoj Bajaj, CEO, CAS Computers.