Mobile phones to become costlier as government hikes GST rate

Mobile phones in the Indian market could become costlier soon as the GST Council, headed by Finance Minister Nirmala Sitharaman, has decided to increase Goods and Services Tax (GST) on mobiles phones and allied parts from 12 percent to 18 percent.

This increased GST is set to go in effect from 1st April 2020. This development comes at a time when the Indian rupee is depreciating against the US dollar. The consumer electronics market, especially the smartphone manufacturers are also facing a touch situation as the product and supply chain has been disrupted because of the coronavirus outbreak.

Soon after the announcement from the GST Council, Manu Kumar Jain, Xiaomi India MD and Global Vice President, took to Twitter to oppose the move from the government. In his tweet, he said that the GST increase will crumble the smartphone industry which is already struggling with profitability.

He also said that the move will force companies to increase prices which will weaken the the Make in India program. Manu Kumar Jain has requested Prime Minister and Finance Minister to reconsider this decision, at least for the devices priced under ₹15,000.

Xiaomi managed to become the dominating smartphone brand in the Indian market through budget devices and a 6 percent increase in the GST fees is a major blow that could affect the potential of the world’s one of the fastest growing smartphone market.

And it’s not just Xiaomi, most of the smartphone brands in India focus on the budget segment, given that India is a price conscious market. The likes of Realme, Vivo, and OPPO also managed to grow their share with budget and mid-range devices while Samsung is also doing the same with its newly revamped Galaxy A-series and the Galaxy M-series of smartphones.

Pankaj Mahindroo, Chairman of the Indian Cellular Association, in a statement to the Indian Express has said that the move is “extremely detrimental to the vision of Digital India”. He added that “consumption will be stymied and our domestic consumption target of $80 billion (Rs. 6 lakh crore) by 2025 will not be achieved. We will fall short by at least 2 lakh crore.”