Forbes India 15th Anniversary Special

Mobile makers feel GST blues

Industry says the move is 'insensitive' during coronavirus panic, and increased GST on mobile phones could weaken demand

Naini Thaker
Published: Mar 20, 2020 05:06:11 PM IST
Updated: Mar 20, 2020 05:17:57 PM IST

Mobile makers feel GST bluesImage: Shutterstock
Already grappling with the coronavirus outbreak, the smartphone industry now has to deal with another hurdle. GST on mobile phones has increased from 12 percent to 18 percent. According to the GST council, the move is an attempt to correct the inverted duty structure in the smartphone industry, where the components were taxed at 18 percent and the finished products at 12 percent.
Experts, however, believe that the GST for all components should have been brought to 12 percent instead. The tax increase—applicable from April 1—has been criticised by mobile manufacturers who say it will push up the prices of smartphones. “This can weaken demand and affect the mobile industry's Make in India programme. It could also have a long lasting impact on internet penetration and the Digital India programme, as a majority of Indians access internet on smartphones,” says Manu Kumar Jain, Global VP, Xiaomi, and Managing Director, Xiaomi India.
“At a time when coronavirus is spreading panic, economic slowdown is at its peak, consumer sentiment is battered and stock markets are in a free-fall, increasing GST is both counter-intuitive and insensitive. This will lead to immediate job losses and dampen future investments in manufacturing,” says Pankaj Mohindroo, chairman, India Cellular & Electronics Association. “Our domestic consumption target of $80 billion (Rs 6 lakh crore) by 2025 will not be achieved. We will fall short by at least Rs 2 lakh crores.”
“The coronavirus pandemic could have been an opportunity for India as smartphone manufacturers look for avenues outside China,” says Navkendar Singh, research director of IDC India, a market research firm. “But these kind of judgements don’t bode well when it comes to the ease of doing business.”