Mobile prices likely to rise after rebate cut

- Post Report, Kathmandu

Jun 1, 2016-

Mobile phone prices may go up as the VAT rebate has been slashed, traders said. The budget statement for the fiscal year 2016-17 has reduced the exemption on the import of cell phones from 50 to 40 percent.

Providing VAT waiver to mobile phone importers, has been controversial and the government has been reducing the percentage of VAT returns. 

Importers of mobile phones received more value added tax (VAT) refunds than what they paid to the government by misusing the VAT Act’s provision, according to the Office of Auditor General (OAG). Amid such reports, the government has been reducing the rate of VAT waiver. The government had introduced the policy of VAT waiver to control under invoicing.

The expected rise in prices following the latest budgetary provision has set off a buying rush with customers snapping up available sets or placing advance orders, according to mobile set importers. 

“Sales of mobile phones have increased,” said Pawan Kumar Bhimsaria, managing director of Generation Next Communications (Genxt), the authorized distributor of Apple in Nepal. 

Besides the reduction in the tax rebate in the budget, a stronger US dollar also threatens to push up mobile prices. Lokesh Oli, owner of Oliz Store which deals in mobile sets, said, “We cannot predict how the market will behave until the new budget is implemented.”  According to him, dealers might have to hike prices in the short term. However, due to constant improvements in mobile technology, handset prices have been falling all the time.

“Although the cut back in VAT waiver is small, it will create fluctuations in price,” said Pranaya Ratna Sthapit, deputy general manager at Samsung Nepal, “The reduction in VAT waiver will impact total costing. The short term impact might be small but in the long term this will increase the costs.”  

As per the Financial Act for 2014-15, the importers can get 60 percent VAT refund if the imported handsets are sold to VAT-registered firms, and they can get 100 percent refund if the handsets are re-exported. The OAG said in its 53th Annual Report that there has been gross violation of this provision, resulting in the government refunding Rs134 million to the importers of mobile devices who had paid just Rs84.4 million in VAT. According to the report, some of the importers have been found to have created fake firms to which they sell mobile sets to claim the 60 percent VAT refund, and resell the handsets through such fake firms to exporters.

Published: 01-06-2016 08:31

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