The decision by the Goods and Services Tax (GST) Council to increase the tax rate on mobile phones will derail the industry at a time of severe economic distress and lead to job losses, the India Cellular and Electronics Association (ICEA) said on Sunday. The GST Council on Saturday hiked tax on mobile phones from 12 per cent to 18 per cent.
“When coronavirus is spreading panic, economic slowdown is at its peak, consumer sentiment is battered and stock markets are on a free fall, increasing GST is both counter-intuitive and insensitive. This will lead to immediate job losses and severely dampen future investments in manufacturing,” ICEA chairman Pankaj Mohindroo said, pointing out that the decision will put a burden of Rs15,000 crore on common man and adversely impact over 100 crore Indian consumers.
Noting that consumers had been paying 4-5 per cent value-added tax and 1 per cent on excise duty until June 2017, and the GST regime had significantly hiked levies to 12 per cent in July 2017. “The 18 per cent GST hike will bring back the bad old days of early 2000s when the grey market in mobile phones was rampant at 90 per cent. It reverses years of painstaking efforts by governments and industry to increase mobile manufacturing and penetration by sensible policy interventions and tax rationalisation,” Mohindroo said.
This move, ICEA said, would prove to be disastrous for the already fragile retailer community with lakhs of small- and mid-sized retailers surviving by selling mobile phones. Mohindroo also said that the hike would make Central government flagship schemes such as Make in India much harder to achieve. “The government revenues post GST had doubled from Rs 10,900 crore to Rs 20,700 crore within two years. To strike the sector with a higher GST at this stage is the equivalent of killing the goose that lays the golden egg. Not a savvy move by any stretch,” he added.