KOLKATA: Several smaller mobile phone and consumer electronics retailers and jewellers across the country are selling products at pre-GST rates by issuing backdated bills, either to clear out old inventory, or because they are not yet ready to move to the new system.
Consumer electronics industry insiders said backdated billing may continue for next couple of days till fresh stock billed on GST rate arrives in the market.
“There is confusion in the market and not all retailers are yet ready to migrate to the new tax system since their backend and billing systems require a software update which is taking time,” said a senior executive with a leading consumer electronics and mobile phone maker.
“Moreover, traders who are still stuck with old inventory will suffer loss since the companies have agreed to compensate stock which is just 30-60 days old. Hence, backdated billing is happening,” the person said.
Sources said several electronics retailers and jewellers maybe using backdated bills to lure back customers who have vanished since the rollout goods and services tax (GST) regime as tax rates have increased on most products.
Consumer electronics and mobile phone stores have been almost empty since Saturday as most consumers completed their purchases last month, fearing an increase in prices. Jewellers across India, too, have reported more than 60% decline in sales since the start of this month due to the hike in taxes on gold to 3% under GST from 2% earlier.
For televisions, refrigerators, washing machines and air-conditioners, the effective tax rate under old taxation system was around 26% including all cesses which has now gone up to 28% under GST, with all companies proposing a price hike of 2-3%. So, retailers selling on backdated bills are pitching it as a bargain deal for consumers.
Several neighbourhood mobile phone retailers in southern states of Karnataka, Andhra Pradesh, Tamil Nadu, Kerala and Telangana are selling on bills drawn on June 29 and 30 to clear out old stock, industry insiders said. These markets had 5% value added tax (VAT) on mobile phones, while the GST on mobile phones is 12%.
Such backdated bills are also happening in Delhi where VAT on mobile phones below Rs 10,000 was 5% while it was 14% for costlier phones. That means Rs 10,000 plus mobiles are cheaper under GST regime in the capital.
Most retailers ET spoke to, however, said they are forced to use backdated ‘kachcha’ bills because their systems are not yet updated and they are yet to meet all the compliances.
“Otherwise, we have to just shut shop,” said a cellphone retailer in Mumbai. “We expect the system will be updated in a day or two,” he said. Another cellphone retailer in Delhi said he is selling on backdated manual bills at old prices since his IT system is yet to be GST-compliant.
Retail industry apex body Retailers Association of India CEO Kumar Rajagopalan said these things are transitionary and will continue in the short term. “But in the long term, every product has to be accountable under GST and law will catch up,” he said.
Most of the mobile phone makers and consumer electronics companies said they will start billing under GST from Wednesday once their IT system is fully upgraded.
Several jewellers across India, too, are selling gold at the earlier tax rate. Jewellery industry associations, however, have issued strong advisories to the trade not to indulge in back-dated billing. Surendra Mehta, national secretary at India Bullion and Jewellers Association, said that while it is difficult to peep into the books of individual members, the body has issued strict instruction not to resort to any unethical mechanism.
Nitin Khandelwal, chairman at All India Gem & Jewellery Trade Federation, said he is yet to come across any incidence where gold is being sold in backdated bills. He said no organised and well established jewellers will try to take the illegal route for selling gold. “It may so happen that customers may have booked gold before June 30 and they are taking delivery now. In these cases, the final bill will have calculations of the earlier VAT regime as gold was booked at the earlier rate. There is no wrongful activity in all these cases,” Khandelwal said.
Some jewellers said they are offering old rates under new tax regime to lure customers back into shops.
(With inputs from Sagar Malviya in Mumbai)