Last week was nothing short of havoc in the Indian telecom industry with the introduction of Goods & Service Tax (GST) by the government. The prices of smartphones have considerably increased, making it difficult for shoppers to buy. Smartphones lovers in India are finding it difficult to digest sudden hike in prices of the brand new smartphones. Will GST really impact the price of budget phones?
It doesn’t matter whether it is new or refurbished smartphone, GST has affected each of them. Now, the question arises that the so called budget phones, which are claimed to be affordable, are they still affordable?
No! GST has affected re-commerce sector immensely. Nevertheless, before reaching out to any conclusion, we have to understand how GST has affected re-commerce sector:
- When a consumer sells his old smartphone to the buyer (refurbisher). Then there is no VAT involved in this transaction because seller is not a registered entity
- On the other side, when refurbisher restores the old smartphone to fully working condition and sells the refurbished smartphone in the market, then he becomes liable to pay 5% VAT. Let me remind you one thing, that there is no VAT credited to refurbisher, since he had purchased old smartphone from an individual entity.
- What does this mean? It means, seller/manufacturer refurbisher had to pay the amount (VAT) from their pocket itself, which they were earlier deducted from their profit margins and this transaction was already proving to be a harmful one.
POST GST ERA
Since the implementation of GST, the VAT % has increased from 5% to 18%, cutting down the profit margins of the refurbisher to bare minimum. This dramatic hike in the VAT has made re-commerce sector non profitable and re-commerce companies are forced to increase the price of their products to survive in this difficult time.
However, despite the implementation of GST, there are number of leading companies in refurbished e-commerce sector including overcart, shoplcues, and yaantra.com who are still ensuring that their shoppers wouldn’t have to face the struggle while buying refurbished smartphone. These re-commerce smartphone companies are coming with daily deals, several offers and introducing several coupon codes consistently to allow customer to get relief.
While all of this is happening, we cannot deny the fact that it has become one hell of a trouble for these companies to survive after GST. Government needs to take some actions; probably they should lower down a certain percentage of tax to give some relief to the Refurbished companies.