“They are not aware of the system, and some don’t want to be part of the system… but if they don’t then they will not be able to get any input credit from us,” the executive said, requesting not to be identified.The government has set the GST on mobile phones at 12%, which will lead to a 4-5% increase in prices of most handsets. “Trade channel is expecting changes in margins under the new tax regime, which is one of the key reasons for distributors and retailers not stocking up,” said Bipin Sapra, indirect tax expert at EY.Distributors may be unsure of how they will get credit for the 2% excise duty they have paid for phones already on the shelves, and for the 12.5% countervailing duty if those phones had been imported, Sapra explained.As per the transition provisions, if a distributor has bought the phones directly from a manufacturer or an importer, they will get full credit for CVD or excise duty. But if the invoice documents are not available, then they will get 60% of the deemed credit of the Central GST liability of 6%.Several brands such as Samsung, Oppo and Vivo have offered price protection while others such as HMD are educating their distributors about the transition to GST, and the distributors are in turn educating the retailers.“We have told the trade that any price differential will be borne by the company, so they are protected against the transition,” a Nokia spokesperson told ET. Samsung, Oppo and Vivo did not comment.But distributors are being cautious. “No one wants to take the risk of taking excess inventory and sitting with it despite some brands assuring that price protection will be offered,” said another executive.Dixon’s Vachani said: “There’s also hesitancy on the part of smaller traders, who will now have to invest in processes to comply with GST rules, if they haven’t already.”

Source: Economic Times June 27, 2017 19:18 UTC