Retailers fret on any deposit scheme for JioPhone Next

Retailers fret on any deposit scheme for JioPhone Next


Handset retailers have raised concerns around any deposit scheme being offered for the JioPhone Next smartphone, claiming that they face issues in filing for Goods and Services Tax (GST) against a deposit slip for the device which is not docked as a sale.

“In a deposit scheme, there is no clarity on who will pay the GST because we are told it is a deposit scheme and the customer can ask for his money return later,” said a Gujarat-based retailer. Another Delhi-based handset retailer has asked Jio and

Retail’s representatives who will pay him if the customer returns the phone and how will the GST calculations then take place.

“If the customer returns the phone, how will I return the money? Will distributors take back the mobile set back? And what if the distributor has changed in these years?” said the retailer. The retailers though say they haven’t yet been told about the marketing and payment models.

Jio and Reliance Retail did not respond to ET’s queries. Reliance had earlier postponed the phone’s launch – aimed at attracting a bulk of India’s 300 million feature phone users to Jio – from September 10 to November around Diwali, due mainly to the chipset shortage. Tax experts say that under the GST framework, such deposits are treated similar to sale proceeds and taxed accordingly.

“The security deposits are taxable under GST at 18% as the taxable event gets triggered which results in the rendering of services or supply. These deposits, even when returned on fulfilling all conditions, will be taxable under the GST unless the telecom company or the retailer can demonstrate that these were refundable security deposits,” said Abhishek A Rastogi, partner at Khaitan & Co, a law firm.

Under GST, the onus is on the taxpayer – in this case, the retailer or Jio – to demonstrate to the tax authorities that this transaction was not a sale but a security deposit. Although tax authorities in the past have claimed that certain deductions made by the retailer or the company from the security deposits is a condition towards sales—or is supply of services.

Some experts said the treatment was quite clear.

“The security deposits sit on the books of Jio and not the retailers,” said a person with direct knowledge about the GST issue on Jio handphones. “The security deposit is treated as consideration and GST is applicable. Even in cases where all the conditions are met by the customer, GST was deducted and the money was returned,” the person said.

JioPhone, launched in August 2017 was a 4G feature phone that was offered for a Rs 1,500 deposit, refundable after three years on return of the device. Retailers are concerned that if Reliance offers a similar deposit scheme on JioPhone Next- being developed with Google – then they would again have to deal with issues around the treatment of GST.

With the telco losing over 11 million users in the July-September quarter, analysts say the new device now be critical to the Indian telecom market leader’s aim of reaching 500 million user bases, from around 430 million now.



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