Smartphones could about to get even more expensive in India; here’s why
An increase in GST rates could put pressure not just on consumers but the entire chain, including handset makers, retailers or anyone associated with the smartphone industry.
The industry body argues that the mobile industry has performed exceedingly well under the ‘Make in India’ plan and hence even a small change in the GST could impact domestic manufacturing. (Representational Image)
The India Cellular and Electronics Association (ICEA), the industry body representing top smartphone brands including Apple and Xiaomi, has written to Union finance minister Nirmala Sitharaman “to retain GST on mobile phones at 12 per cent” after reports that the Goods and Services Tax (GST) Council is expected to hike the rate on mobile phones to 18 per cent from the current 12 per cent. The final decision will likely be taken at the next GST Council meeting on March 14.
In a letter dated March 12, as seen by indianexpress.com, Pankaj Mohindroo, President, India Cellular and Electronics Association said: “The industry body is in extremely deep stress because of a serious disruption in supply chain due to Coronavirus… This is the most inappropriate time even to consider any sort of hike in the GST rate on mobile phones.”
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At the moment, the current GST rate on mobile phones is 12 per cent, while batteries and mobile components fall under the 18 per cent tax rate slab. This causes an inverted tax structure, meaning the tax rates are higher on inputs than on furnished products. The GST council is expected to correct the inverted duty structure at a meeting on Saturday.
An increase in GST rates could put pressure not just on consumers but the entire chain, including handset makers, retailers or anyone associated with the smartphone industry.
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The industry body argues that the mobile industry has performed exceedingly well under the ‘Make in India’ plan and hence even a small change in the GST could impact domestic manufacturing. Right now, almost all the phones made by Chinese smartphone manufacturers are made in India. Xiaomi claims that 99 per cent of its phones sold in India are made in the country. Apple too manufactures some of its iPhones, including the iPhone 7 and iPhone XR, in India.
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“Smartphone companies are not in a position to absorb added cost,” said Navkendar Singh, Research Director, Client Devices & IPDS, at IDC India. “We were actually thinking that they would decrease it to 5 per cent to enable manufacturers to pass it onto the consumer and then drop the prices on the phone,” he explained.
Singh said if the government decides to increase GST on mobile phones from 12 per cent to 18 per cent, smartphone vendors may need to increase smartphone prices significantly. The analyst said this move could cripple the Indian smartphone market, which is seen as the only bright spot for major tech companies in the midst of hard times.
A senior executive of a renowned retail chain said an increase of 6 per cent GST on mobile phones will badly impact consumer sentiment. “A person trying to buy a phone will still buy but it will affect the mood of consumers,” he said, adding: “The motive is not understood. Because when they brought it from the VAT regime to the GST regime, there was a clear hike in tax.”
“The components may come from China or any other part of the world, but the phone is made in India. If you make in India, I will ensure the taxes are lower,” he said.
“Coronavirus is a temporary thing, but when you try to raise the GST to 18 per cent it is almost a permanent move from the government. Brands are not in a position to absorb cost, they have to pass on extra cost to consumers,” Singh said.
Anuj Bhatia is a seasoned personal technology writer at indianexpress.com with a career spanning over a decade. Active in the domain since 2011, he has established himself as a distinct voice in tech journalism, specializing in long-form narratives that bridge the gap between complex innovation and consumer lifestyle.
Experience & Career: Anuj has been a key contributor to The Indian Express since late 2016. Prior to his current tenure, he served as a Senior Tech Writer at My Mobile magazine and held a role as a reviewer and tech writer at Gizbot. His professional trajectory reflects a rigorous commitment to technology reporting, backed by a postgraduate degree from Banaras Hindu University.
Expertise & Focus Areas: Anuj’s reporting covers the spectrum of personal technology, characterized by a unique blend of modern analysis and historical context. His key focus areas include:
Core Technology: Comprehensive coverage of smartphones, personal computers, apps, and lifestyle tech.
Deep-Dive Narratives: Specializes in composing longer-form feature articles and explainers that explore the intersection of history, technology, and popular culture.
Global & Local Scope: Reports extensively on major international product launches from industry titans like Apple and Google, while simultaneously covering the ecosystem of indie and home-grown tech startups.
Niche Interests: A dedicated focus on vintage technology and retro gaming, offering readers a nostalgic yet analytical perspective on the evolution of tech.
Authoritativeness & Trust
Anuj is a trusted voice in the industry, recognized for his ability to de-jargonize trending topics and provide context to rapid technological advancements. His authority is reinforced by his on-ground presence at major international tech conferences and his nuanced approach to product reviews. By balancing coverage of the world's most valuable tech brands with emerging startups, he offers a holistic and objective view of the global technology landscape.
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