GST: Mobilephone exchange offers may come to an end

Varun Aggarwal Mumbai | Updated on January 12, 2018 Published on June 07, 2017

The tax will have to be paid on the full value, instead of the value after exchange

If you’re planning to buy a new phone and thinking you’ll save money by trading in your old one, you may be better off keeping both the new and the old, as post July 1, trade-in offers on mobilephones may be a thing of the past.

While experts believe mobilephone prices may not get majorly impacted post the implementation of the Goods and Services Tax, GST may put additional tax burden on exchange offers.

“The exchange scheme will surely get impacted, and offers may go down since input credit may not be available (under GST),” Rajiv Jain, CFO at Intex Technologies, told BusinessLine.

The tax regime will impact exchange offers because the tax will have to be paid on the full value of the mobilephone instead of the value after exchange. Therefore, in order to provide exchange offers, either the manufacturer takes a hit on his margins or passes it to the consumer, who may not find the deal lucrative enough after the additional tax.

“Currently, if you purchase a phone worth ₹20,000 and get ₹2,000 discount by trading in your old phone, you essentially pay VAT only on ₹18,000. However, under the GST, mobilephone companies will have to charge tax on the original price of the phone, which is ₹20,000, making trade-in offers more expensive,” said Bipin Sapra, an indirect tax expert at EY.

Experts believe the government still needs to reconsider the move as this will act as a case of double taxation.

“The consumer has already paid tax on his old phone. While returning, therefore, he can’t be charged again. We are hoping the government will take note of this and come out with a clarification,” said Suresh Nandlal Rohira, Partner at Thornton India.

Published on June 07, 2017
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