3In of excise duty and value added tax

3In
2015, revenue from the electronics customer durables sector was at US$ 9.7 billion, which further increased to US$
12.5 billion in FY16 in India; also consumer durable market expected to grow at
Compounded Annual Growth Rate (CAGR) of 13% from FY05 to FY20. Almost, two
third of the total revenue is generated from urban population and the rest is
generated from rural population. Few of the major domestic players like Godrej
group, Onida Electronics, Blue Star and Videocon Industries are operating in
India as electronics consumer durable market. 6In the previous
indirect taxation system consumer has to pay around 25% more than the actual
cost of production due to the levy of excise duty and value added tax on
manufactured goods. 5For durables like television, air conditioner,
refrigerator and washing machine the cumulative tax (excise and value-added
tax) was around 23-28% depending from state to state.

 

8Consumer durable manufacturers in
Maharashtra claim to have taken a 30% hit in their March sales, due to the
prevailing confusion over the implementation of VAT. Expecting a cut in the
prices of durables in the post-VAT regime, consumers preferred to rein in their
purchases and wait for the transition. This also led to inventory pile-up with
dealers, thus causing some panic in the industry. Consumers expected a fall in
prices as the VAT rate of 12.5 % is lower than the previous sales tax of 15.8 %
in Maharashtra. The acceptance of VAT by only
some States hampered the original intent behind the tax reform. Further, even
among those States which went in for VAT, there were disparities in the tax
schedule, with the same product classified differently across different State
boundaries.

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1 During May
2017, consumer durables
attract Value Added Tax (VAT) which varied between 12.5% to 14.5%, varying from
state to state and around 8.6% of excise duty including the cesses. 2Moreover,
electronics durable brands dropped their prices in order to liquidate stocks
but the reverse had happened and as a result, companies were trying to absorb
the GST rates since they have been compensated by abolishing octroi duties (5%)
in few states like Maharashtra.

 

4Although trade partners and dealers had exhausted their
stocks by showering discounts up to 50% in few, 7 while offers on
refrigerators, televisions, air conditioners and washing machine had discounts
that went up to 40% in other clearance stock sales, 7 makers still
had finished and raw materials lying in their warehouses and would take
two-three months to avail the tax credit and bring it at pre-GST level.

 

 7During
Diwali, companies had to give away smaller
refrigerators with their side-by-side refrigerators, and even additional
six-month warranties in the room air-conditioners segment since their dealers
have similar expectations in sales like the pre-GST period

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