Krishna Choudhary, Director, Rashi Peripherals, spoke to Amit Singh about the company’s expectations from GST and how has it affected the IT channel business
What are your thoughts about the GST regime?
While we welcome the long awaited, we expected it to be a more simplified tax regime. The government proposes GST as ‘One Nation, One Tax,’ but according to us it does not really fit in. There are still multiple tax slabs and taxes like IGST, CGST, SGST and UTGST. The most complicated thing is different taxes on various IT products and registration required in each State for an entity like us.
In most of the countries, we find only one GST. Considering India’s vastness, there could have been maximum two GST rates, which were planned earlier. Then GST would have fulfilled the notion of ‘One Nation, One Tax’ in real terms.
However, there are certain benefits the new tax regime brings to the industry such as easy interstate movement of goods without any implication of CST, entry tax and Octroi, which were the major hurdles in terms of movement of goods.
For the IT industry, there are certain additional advantages with GST. Businesses which were not relying much on IT would certainly buy PCs and may upgrade their IT systems to comply with the GST norms. There we see a lot of opportunity for the IT industry.
Please give us a pre- and post-GST comparison on IT products.
If we talk about tax comparisons, there is not much difference between pre and post GST regimes, except in a few cases. It would have been better if these few cases of disparities would have been eliminated. For instance, monitors below 17-inches are taxed at 18 percent as compared to 28 percent for monitors of 17-inch and above.
Further, the interpretation is still not clear for certain products, AMCs, software, business auxiliary services, buying from unorganized and unregistered partners and reverse charge mechanism (RCM). These are all complications which still exist under the GST.
Many of the partners are struggling with their existing stocks/inventory. According to you how is GST affecting businesses of IT channel partners?
We need to understand that this is a transitional phase and few problems are bound to happen. I think the government should have been more generous in allowing input tax credit on the transitional stocks.
In terms of vendors’ support to partners in liquidating their inventory, of course, some of the vendors have come forward and offered buyback schemes. They have also offered some credits to be given on the inventory carried forward. But that is not enough as it does not reach at each level of the partners in the market.
I think vendors are also right on their part as they cannot reach everywhere. As many of the traders are unorganized, there is no mechanism of reporting inventory; hence, vendors are shying away from giving support on the stock to that extent. They don’t know how much loss they might otherwise incur.
On the other hand, majority of the partners have already reduced their inventory significantly and may take another month for complete destocking.
As a distributor, we have also offered full-support to our partners. Wherever any vendor has given a support on the inventory held by a partner, we have passed it on. As far as products imported by Rashi are concerned, we have provided our partners with excise gate pass to enable them claim 100 percent input tax credit. We have also accommodated return of stocks in pre GST regime