The price of smartphones in India is set to rise as the GST Council has decided to raise the Goods and Services Tax (GST) from 12% to 18% on April 1.
According to the government, this is to correct the inverted duty structure – currently finished phones are taxed at 12%, but components to built phones are taxed at 18%. The president of the Telecom Equipment Manufacturers Association of India stated that a better way to correct the inversion would have been to drop the component tax rate to 12%.
Manu Kumar Jain, the managing director of Xiaomi India, states that the GST increase will “crumble the industry”, especially as it’s trying to recover from the supply chain disruption caused by the COVID-19 outbreak.
Jain tweeted at PM Modi, asking for an exemption for phones under INR 15,000 ($200). He warns that the higher tax rate will weaken the government’s “Make in India” program.
The industry is already struggling with depreciating INR & supply chain disruption due to Covid-19.
Various other organizations are protesting the change too. The ICEA chairman warned that domestic consumption goal of $80 billion by 2025 will be missed by $25 billion. This will also be detrimental to the retail industry, states the All India Mobile Retail Association.