Demonetisation and GST-hit DataWind shuts Hyderabad facility

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DataWind, maker of the world’s cheapest tablet Aakash, has closed down its manufacturing facilities in India.

DataWind, maker of the world’s cheapest Android-based tablet Aakash, has closed down its two manufacturing facilities in India, after business shrank due to demonetisation in 2016, Goods and Service Tax (GST)-related issues, besides the country’s duty structure, leading to a loss of some 1,000 jobs.

DataWind’s chief executive Suneet Singh Tuli told ET that the twin challenges had derailed the $35-Aakash tablet computer maker’s strategy to Make in India for the rest of the world, using the country’s human resource and cost-effective operations.

“Our target segment — those at the bottom of the pyramid — was severely impacted after demonetisation and has continued to suffer since then,” Tuli said.

While people familiar with the matter say both facilities — at Hyderabad and Amritsar — have been shut down, Tuli said that the Amritsar plant is still operating, but at far lower capacities. In 2017, the British-Canadian company had already halved its production at its Hyderabad unit, where production has completely halted now.

These people said that DataWind has been forced to hold up vendor payments as well as to those employees who have parted ways, while its debt has mounted to Rs 250 crore.

Tuli, however, said that the Rs 250-crore debt on its books was inter-company, and that was the investment that has been made from the Canadian parent company into India operations. He further said that the company was fighting a slew of court cases to recover its dues.

“Subsequent to demonetization, India Post stole and misappropriated over 30,000 units for which court cases are still pending and recovery is awaited,” Tuli said.

Emailed queries sent to IndiaPost remained unanswered till press-time.

Once booming India’s tablet market has been reduced to a third, impacted by demonetisation of currency, and existing levies on components and higher GST slab, said Tuli.

“Bureaucratic overhead in India makes it simpler to bring in finished goods, instead of making them locally. Current duties on components vis-a-vis finished goods no longer provide any incentive to manufacture in India,” the executive said.

The company’s business, mainly driven by cash-on-delivery (CoD), is no longer attractive to end-consumers who have eventually lost purchasing power, and according to the company, the moving to the GST regime turned out to be a spoilsport.

“GST of 18% tablets versus 12% on smartphones created a disincentive for customers to buy a 7-inch tablet versus a 6-inch smartphone,” Tuli explained.

The refunds associated with GST, he said, were still pending and the company was forced to approach the courts to make recoveries.

Under the existing circumstances, Tuli said that business had become difficult, and added that the government should eliminate duties on parts to facilitate educational devices intended for the lower strata of society.

Source : https://economictimes.indiatimes.com/tech/hardware/demonetisation-and-gst-hit-datawind-shuts-hyderabad-facility/articleshow/69260432.cms

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