Date:07/08/2005 URL: http://www.thehindubusinessline.com/2005/08/07/stories/2005080701930200.htm

Back `VAT impact on Q1 PC sales only incidental'

Vinson Kurian

Mr S. Rajendran

Thiruvananthapuram , Aug. 6

CONFUSION over value-added tax (VAT) was only incidental in having affected computer sales in April-June, a quarter that does not portend good tidings to the industry even in the best of times.

"We're not at all worried this would have any bearing on anticipated sales for the April 2005-March 2006 fiscal," said Mr S. Rajendran, General Manager-Sales & Marketing, Computer Product Group, Acer India.

Speaking to Business Line here, he said projections for the calendar year (January-December 2005) is four million PCs.

For April 2005-March 2006, they vary from 4.2 million to 4.35 million. Analysts have been saying that during April-May, notebook sales have been ahead of projections.

But desktops have lagged by five per cent, while server sales have been "dull."

This was attributed to confusion over VAT implementation as also non-clarity over the Information Technology Agreement (ITA).According to Mr Rajendran, purchases may have been postponed ahead of VAT going on stream. But to blame ITA for the outcome sounds a bit far-fetched.

He said there has been no uniform adoption of VAT by all the States. There are pockets that are still non-compliant. "But beyond this, I don't want to say that this has been an inhibiting factor."

On ITA, Mr Rajendran said that the prevailing position has, in fact, been positive for the industry. "We've complied with what we've been required to, saying we will bring base duties to zero on many items.

"Probably, the only counter-balancing factor was the CPU and some components, in respect of which the duty was earlier zero, but a four-per cent equivalent of VAT has been levied lately. Honestly speaking, that could not have created much confusion or slowed down sales."

Unfortunately, with VAT implementation, some entry barriers such as octroi and turnover tax have continued to be in place. . To that extent, it has been slightly disappointing, he added.

This is as far as the industry is concerned. "But for Acer India, the performance has been extremely good — whether it is notebooks, desktops or overall. We have a couple of growth engines, which is bucking the trend."

The monsoon performance will go a long way in influencing the numbers as it is inextricably linked to the scaling up of production in anticipation of better sales in the agrarian segment.