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GST may make exchange offers on electronic gadget unappealing.
GST may make exchange offers on electronic gadget unappealing.
Hey guys, How are you ? We are back with yet another interesting article on GST. Do you plan to exchange your existing mobile to buy a new one at a discounted rate? Do it soon, because once GST is implemented, chances are that you may have to pay more taxes on exchange offers. For ex- Samsung introduces an offer for galaxy s 7. In which it says bring any of your old samsung phone and get a discount of Rs. 4,000 on the new phone. Nowadays, almost all the companies selling appliances are introducing these kind of offers.
Exchange offers on mobiles, televisions and refrigerators are going to attract a goods and services tax (GST) on the original price of the product and the reduction in the newer product will not be considered.
Currently, VAT is only payable on the cash that is paid.
According to an example mentioned in the draft rules, "Where a new phone is supplied for Rs 20,000 along with the exchange of an old phone and if the price of the new phone without exchange is Rs 24,000, the open market value of the new phone is Rs 24,000."
After introduction of GST, tax will be charged @ Rs.24,000. However, currently tax (VAT) is charged after the discount i.e., on Rs. 20,000. This extra tax on Rs. 4,000 may cause discomfort to the consumers.
This can also affect the electronics and the consumer durables space, especially the items on which you would frequently see exchange offers.
The government had on Sunday created rules regarding the new indirect regime to give more shape its various facets like the transition to GST and input tax credit.
This will help make the industry more ready for the GST and will give stakeholders ample time to respond before its expected July launch.
