- The GST Council has decided to increase tax on phones by 6 per cent, from 12 per cent to 18 per cent.
- Trade association of phone makers says that this will hit the market hard and make it more difficult for companies.
- Xiaomi India chief Manu Jain says that GST hike may lead to increase in phone prices.
The GST Council, headed by Finance Minister Nirmala Sitharaman, on Saturday, increased GST on smartphones from 12 per cent to 18 per cent. The move is bound to raise the prices of smartphones in India, says a trade association that has many phone companies as its member. While it is not clear how much the prices will increase, when combined with the weakening rupee against dollar, the prices of phones like the latest Redmi Note 9 Pro or the Moto Razr that is going to be launched today, could be higher by around 5 to 10 per cent.
The government announced the GST hike on phones on Saturday. The India Cellular and Electronics Association (ICEA) has said this decision by the government would "stymie consumption", or in other words sale, of phones.
Pankaj Mohindroo, ICEA chairman told IANS, The 6 per cent GST increase will be detrimental to the vision of digital India. Consumption will be stymied and our domestic consumption target of $80 billion (Rs 6,00,000 crores) by 2025 will not be achieved. We will fall short by at least Rs 2,00,000 crores.
ICEA, in a letter to the Finance Minister, wrote that the mobile handsets sector was already in deep stress due supply-chain disruption happened after coronavirus outbreak in China. The GST rate increase will affect the market adversely. The industry body said that it was the most inappropriate time to increase the GST.
According to ICEA, the hike in GST will affect the localisation of manufacturing.
Navkendar Singh, research director of IDC told IANS that the phone brands would not be able to handle the impact of the GST. Singh, too, termed the move as detrimental to digital India's vision. "This is a textbook case of missing the wood for the trees. This will stunt any hope of growth in the near-term, which anyway looks challenging now due to coronavirus issue at both supply and demand ends, he said.
Industry reaction also came in from Manu Jain, India head for Xiaomi, which is the biggest phone company in the country. On Twitter, Jain talked of the GST hike and how it would affect the phone market. He tweeted, GST increase for phones from 12 per cent to 18 per cent will crumble the industry. Smartphone industry is already struggling with profitability due to depreciating INR vs US$. Everyone will be forced to increase prices. This will further weaken mobile industry's MakeInIndia program. My humble request to Hon PM and FM please reconsider this GST hike. The industry is already struggling with depreciating INR and supply chain disruption due to Covid-19. At least all devices under $200 (Rs15,000) must be exempted from this.