Delhi IT Distributors in Fear of loss after GST

Distributors and trade retailers of Delhi are in fears of losses that could occur during the transition from the current tax regime to the goods and services tax (GST) starting 1 July.

Channel partners major fear is, they may incur losses while selling the old stock lying with them after 1 July, said Baldev singh, Web Income Services, Nehru Place.

Retailers fears that post GST implementation, they could incur losses on old stock for which excise duty invoice is not available and the new GST rate is higher than value-added tax (VAT) rate in the old tax regime.

“The pending stocks with distributors on 1 July will result in losses for the company, GST comes as a relief to the industry but it won’t neutralizes the loss on transition stock to a large extent” says Rajiv Mehta, Zest Systems, New Delhi.

The increase in tax credit limit is good, even that is not enough to cover losses for retailers. “So, the liquidation of the stock will continue.” according to Nitin Agarwal, Channel partner based in Nehru place.

The GST Council allowed input tax credit of 60 percent of applicable Central GST for items in the 18 percent tax bracket, and kept the cap at 40 percent for products taxed at below 18 percent.

We can’t deny the fact that IT traders business would take a hit for the initial few months because of reduction of inventory, and volumes may be impacted even after that for certain categories where the taxes have increased. Further.