The Central government’s decision to hike Goods and Services Tax (GST) on mobile phones and specific parts to 18 per cent from 12 per cent earlier has not gone down well with smartphone makers, especially Xiaomi.
Reacting to the move, Xiaomi India managing director Manu Kumar Jain said that this recommendation by the GST Council will seriously harm the industry.
The GST Council’s decision to increase tax also comes at a time when the industry is struggling to source components from China on account of coronavirus (Covid-19) outbreak and when the value of Indian rupee is depreciating against US dollar.
The Central government had also announced an increase in customs duty on imported parts announced in the Union Budget.
“Indian smartphone industry is facing supply chain disruption because of the current Covid-19 situation… As a result of this increase in GST rates, all smartphone makers will be forced to increase prices.
This can weaken demand and the mobile industry’s Make-in-India programme,” Jain said. “This could also have a long-lasting impact on internet penetration and Digital India programme as a majority of Indians access internet on smartphones,” he added.
Further, the Xiaomi India head has requested the Prime Minister and Finance Minister to reconsider the increase in tax.
“At least for people who cannot afford to buy expensive phones, we suggest that goods and services tax on all phones under Rs 15,000 should be brought back to 12 per cent (similar to differential GST structure for televisions smaller than 32 inch),” he said.
The Confederation of All India Traders (CAIT) has also opposed the move. “The decision is highly unwarranted, deplorable and will destabilise mobile trade in India. The industry is already facing a battle for survival from online platforms. Instead of providing relief, the mobile sector is being burdened with an unnecessary hike,” said Praveen Khandelwal, national secretary-general of the retail association body.
Double whammy
The tax hike comes at a time when the mobile phone industry is struggling to source components from China and is also being hit by depreciation of INR.