The Goods and Services Tax (GST)
council has decided to increase GST on mobile phones by 6%. This
brings up the previous 12% GST to an 18% now.
The Goods and Services Tax (GST) council has decided to increase
GST on mobile phones by 6%. This brings up the previous 12% GST to
an 18% now. Industry experts and smartphone companies have spoken
up about this hike asking the government to roll it back since it
is going to be detrimental to the market.
Reacting to this, Xiaomi India MD Manu Jain tweeted:
Watch | GST on mobile phones hiked to 18% from 12%: Nirmala
Sitharaman
Jain followed this up with a request to the prime minister and
the finance minister asking them to reconsider this GST hike.
Thanks to this GST hike, mobile phones are going to become more
expensive unless smartphone makers can figure out a way to cap
prices which is going to be difficult.
According to an IDC (International Data Corporation) report, the
Indian smartphone market grew only by an mere 8% YoY in 2019,
however, in the bigger scheme of things, India was still amongst a
handful of the top markets last year. This hike in GST is going to
act as a deterrent to the growth India witnessed on the global
smartphone market list.
"This doesn't bode well for the growth intended by the
government for digital services. It has to start with more people
coming in the smartphone fold. With these decisions that won't
happen," said Navkendar Singh, Research Director, Client Devices &
IPDS, at IDC India.
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"Considering the current supply and projected demand scenario in
the next couple of quarters, brands are not in any position to
absorb this hike. They will be forced to pass it onto the consumer,
which will further increase the replacement cycle (which has been a
major engine of growth in the market for the past couple of
years)," Singh added.
"At a time when there is a bit of weakening demand as well as
shaky supply chain due to the coronavirus outbreak, increasing
price pressure on the industry is damaging," said techARC founder
and chief analyst Faisal Kawoosa.
"We were all looking at the ₹36,000-crore package for local
manufacturing impetus, and here we get a surprise from the
government wanting an additional ₹12,000 crore in a year from selling 160
million smartphones," Kawoosa added.
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AIMRA (All India Mobile Retailers Association) also requested
the Finance Minister not to hike the GST on mobile phones.
"An increase of 6% GST will break the crippling mobile retail
industry, already burdened with low margin business in today's
scenario and fighting for rightful existence. The increase of 6%
would directly lead to the hike in prices of product, impacting the
consumer behavior leading to a slowdown in the demand affecting the
business adversely," said AIMRA National President Arvinder
Khurana.
India Cellular and Electronics Association (ICEA) chairman
Pankaj Mohindroo called this decision detrimental to the vision of
Digital India and said -
"The increase of GST by 6% will be extremely detrimental to the
vision of Digital India. Consumption will be stymied and our
domestic consumption target of USD 80 billion (6 lakh crores) by
2025 will not be achieved. We will fall short by atleast 2 lakh
crores. This was time for statesmanship especially when the country
is going through a crisis and as a nation, we have fallen
short".
