Raise in GST on Mobile Phones, India to Undergo Job Loss

GST on mobile phones to raise from 12 percent to 18 percent at the time of country's economic slowdown along with the addition of deadly coronavirus outbreak. This move is expected to derail the industry and result in job losses. The Indian Cellular and Electronics Association (ICEA) states that the decision to increase the GST on mobile phones would burden common man with 15,000 crore and the 100 crore Indian consumers would undergo its adverse effect.

"When coronavirus is spreading panic, economic slowdown is at its peak, consumer sentiment is battered and stock markets are in free-fall, increasing GST is both counter-intuitive and insensitive. This will lead to immediate job losses and severely dampen future investments in manufacturing," says Pankaj Mohindroo, Chairman, ICEA.

Until June 2017, Indian consumers were paying four to five percent value-added tax and one percent excise duty. Post which, the country was slashed with 12 percent GST which has been further raised to 18 percent. The increase in GST could be disastrous for the retailer community, a larger lot of small and medium-sized retailers who solely depend on selling mobile phones.

"The 18 percent GST hike will also bring back the bad old days of the early 2000s when the grey market in mobile phones was rampant at 90 percent. It reverses years of painstaking efforts by governments and industry to increase mobile manufacturing and penetration by sensible policy interventions and tax rationalization," Pankaj adds.

According to ICEA, increasing GST on mobile phones would be contrary to Prime Minister Narendra Modi's vision to make India the global leader in Mobile phone manufacturing. This move would force the smartphone makers to increase the mobile handset prices.

"As a result of this GST increase, all smartphone makers will be forced to increase prices. This can weaken the demand and mobile industry's Make in India program. This could also have a long-lasting impact on internet penetration and digital India program as majority of Indians access the internet on smartphones," states Manu Jain, Managing Director, Xiaomi India.

The country's mobile manufacturing production has been increased by five-folds and its revenue by 10-folds, from 58 million units valued at 18,900 crore in 2014-15 to 290 million units valued at 1,81,200 crore in 2018-19.

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