Fearing GST Will Rob Them Of Cost Advantage, Amazon, Flipkart Plan To Sell Smartphones In Offline Stores

To expand their business offline and adjust themselves in the post GST(Good & Services Tax) era, top e-commerce companies Amazon and Flipkart are planning to sell smartphones through brick-and-mortar stores.

The smartphones manufactured by companies like Motorola, Huawei ,Coolpad, One-Plus,and Lenovo will be part of the offline sale by Amazon initially.

Talks are underway with Samsung and Xiaomi to launch their popular models like Samsung On5 Pro and Mi, respectively. However, Flipkart is yet to officially confirm its plans, but it has given an indication to the brands that it will foray into offline expansion of the smartphone business, reported The Economic Times.

India is expected to overtake the US as the second-largest smartphone market next year with robust annual growth, says a Morgan Stanley research report. According to the report on global technology and telecom, the country’s smartphone market will grow at a compounded annual growth rate (CAGR) of 23 percent through 2018 and would account for 30 percent of the global growth during the period.

In terms of overall mobile phone sales (including feature phones), Samsung led the segment with 25 percent share in the first quarter of 2016.

“At present, online sellers sell from low value added tax (VAT) markets like Bengaluru and Hyderabad where VAT on smartphones is 5% while it is much higher in most of the other markets, with the national average at around 10-12% whereby they have a pricing advantage to sell at such low prices,” a senior executive told the newspaper.

He added that this difference will be wiped away when GST will come into effect, making online and offline a much more level-playing field. Hence, Amazon and Flipkart are trying their best to establish themselves in the offline market with the help of their already existing agreements with multiple brands for exclusive distribution.

The offline distribution of smartphones will be done independently by offline distributors appointed by Amazon, the report adds.

Chances are bright that GST will be rolled out by July.

The Cabinet on Monday cleared four pieces of legislation that must be passed to roll out a countrywide Goods and Services Tax or GST, a landmark tax reform.

The GST will replace a complex patchwork of state- and local-level taxes with uniform tax rates for all kinds of marketplace transactions. The GST is nothing but an agreement between all states to levy uniform rates of taxes and not charging for the same good twice. With both ends of the supply chain mapped into a national software, there’s little chance a taxpayer can go hiding in between.

The country only has time until September 16 to implement the GST, by which states must suspend their powers to levy indirect taxes. The Cabinet’s approval to the four enabling bills paves the way for its introduction in the ongoing session of Parliament.

“The government is committed to early introduction of GST, one of the biggest reforms, in the country as early as possible. GST Council has decided July 1as the date of commencement of GST,” a government spokesperson said.

The four bills are likely to be treated as money bills because that will only require the approval of Lok Sabha to ensure faster passage. Of the four, Parliament will have to pass the central GST legislation and states need to pass their versions of the same law, apart from one integrated GST bill. Another piece of legislation that must go through provides for monetary compensation to states to make up for their initial revenue losses after the GST rolls out. A bill for union territories will also need to be enacted.

The four Bills were approved by the GST Council – a joint Centre-state panel -- after clause-by-clause debate spread over 12 meetings in the last six months.

“The timely approval of the Bills ensures that the industry would have reasonable time to peruse the details of the law impacting them,” Abhishek Rastogi, analyst and partner with Khaitan & Co, an investment advisory firm, said in a statement.

The four bills cleared are The Central Goods and Services Tax Bill 2017, The Integrated Goods and Services Tax Bill 2017, The Union Territory Goods and Services Tax Bill 2017, The Goods and Services Tax (Compensation to the States) Bill 2017.