The ambiguity over VAT and firm
attitude of sales tax department, coupled with impractical pricing by
most of the vendors have irked the upcountry partners in the
UP
East region. This have caused an apparent flutter in the
market where VARs and retailers are selling products below the MOP.
Ironically, the sales tax department in the Uttar Pradesh is issuing
recovery notices to the partners, despite of negative profits. It is
learnt that few of them in Lucknow and Kanpur have already received
such notices Speaking to The DQ Week, Yogesh
Agarwal, Director of Kanpur-based ACP Distributors said that, there
is a lack of clear-cut policy on VAT, and the industry is in pressure
as the government want cascading tax from the partners. "Since
the resellers are involved in negative growth, depending upon the
rebates, therefore it is apparently not viable to impart VAT as there
has been no value addition," said Agarwal. Himanshu Kohli,
Director, Comexcell Technologies, who is a well-known sub-distributor
in the region said that, the back-end structure adopted by most of
the vendors is faulty. "The partners are already selling the
products below the MOP, and the critical aspect is that some of them
have received recovery notices from the sales tax department,"
he said.
According to Kohli, Samsung has
recently taken an initiative, in which it has abolished free
additional TFTs on volume purchase, and as a corrective measure, the
company have cut down the product price. Peeyush Jain, Director of
Well Known Computers said that, MOP is crucial in determining VAT,
but unfortunately partners have to sell below the price. "This
issue can't be rectified without the vendors-driven initiatives. As a
part of measure, the companies should identify the dealers who sell
below MOP and discontinue business with them for the betterment of
overall business," said Jain.
Allahabad-based Shiv Shankar Singh,
Director of one of the leading sub-distributors, Stek Systems said
that the key problem is with multi-fold programs initiated by
vendors, and the partners have to sell products below the MOP. There
has been an apparent business impact due to variations in MOP, while
the sales tax department seems in no mood to spare IT channel
partners despite of negative profits. However in tandem, the vendors
provide back-end rebates and schemes to suffice the loss and increase
partners' profitability. On the other hand, there is apparently no
corrective measure from the vendors, expect few like Sony and
Samsung. In order to counter taxation issue, the partners in
Allahabad, Varanasi, Kanpur and Lucknow are yearning for a change in
pricing policy from all the vendors, including HP, which is one of
the largest selling brands in the state.