GST Impact on Mobile Phone Manufacturers in India

The 39th GST Council meeting held at New Delhi decided to raise the GST rate on mobile phones to 18% from the currently applicable 12% in the wake of various revenue generation methods.

The goods and services tax has finally ended up an online party for smartphone customers. The gap between the online and retail prices of the smartphone is now reduced to a considerable level with still lesser price marks in comparison.

But, the German research company GfK stated that there will be no impact on the sales of smartphones due to GST. The company figured out an approximate 14 percent increase in the demand on a year-wise basis.

The research papers said that “GfK expects the announced Goods and Services Tax (GST) will have no impact on smartphone demand in the country. GfK forecasts overall smartphone demand in the region will total 234 million units in 2017, an increase of 11 percent year-on-year.”

It is sorted out that the latest technology has been flashing on its highest potential and is the reason for removing the barriers of any price hikes. The smartphone manufacturers are making their gadgets top of the line to out beat any price differentiation or surge in the market.

Mobile manufacturers including components makers, contractors, and other giant producers are under the middle way towards a staggering investment of 1 thousand crores into the Indian smartphone industry to the goods and service tax regime as it will make a one nation one market scenario for all the industries. NH

E-Commerce companies will be able to freely deliver goods across the country and certain complaints of specific states not falling into the delivery zone would be eliminated. The rise in the cost of the tax to a dual concept of 12% & 18% would increase administration costs for E-Commerce players, therefore, it has been decided by the GST Council that feature phones will be retailed at 12 percent while the smartphones have been kept at 18 percent. Online sales have been slowed down for the last 2-3 months due to the additional taxes levied by certain states. However, it is still a matter of concern for many E-commerce players.

With the growing competition from Chinese manufacturers like Huawei, Oppo, etc. it is going to be interesting to see how things follow up in the coming months. Also, note that major manufacturers including Apple have promised to make their smartphones in India. So if that happens successfully then, all this can cut down the cost a lot as well. At “one rate”, the prices of mobile phones will decline. For example, Apple which was shipping iPhone 6 32GB online prior to the GST implementation, at INR 26000 is now bundling the same package at INR 27300 with no changes in the retail prices.

The government is also seeking to apply the customs duty over the imported mobile phones in order to boost and encourage the local manufacturers to compete in the market. The application of customs duty is being targeted at the foreign companies exporting towards India, valuing down the local manufacturers and also evoke Apple to start producing in India.

While India has exempted various electronic products from countervailing duties being imposed on the side bracket of central excise duty but the exemption grants cannot survive long in the GST era ending the exemption chain.

On the other hand, deduction of tax at source for every product purchased from sellers could compel e-commerce companies to do away with sales, discounts, and special offers. In short, you may no longer get the cost-benefit from e-commerce companies, but you can expect faster shipping and lower delivery prices.

Recommended: GST Impact on Indian Telecom Industry

Experts commented that with the arrival of GST, states having lowered VAT earlier will be in first to hike the prices as the GST applied is 12 percent. But it will also contradict the point of easy shipments and movement of goods across the nation which assumes of making the smartphones cheaper after GST.

GST Impact on Xiaomi Mobile Accessories

After the implementation of GST across the nation, it is found that selected accessories of Xiaomi are now cheaper by some margin. The Chinese telecom has stated that the prices of accessories have been slashed in the wake of the recent GST council meeting. Xiaomi announced the price reduction in its community forum mentioning the GST council decision reason behind the price cut on accessories.

Accessories like a power bank of 10000mAh worth RS 1,199 are now available at 1,099 while the MI Power Bank Pro 10000mAh is now available at Rs 1,499 down from Rs 1,599. There is some other price slashing in the product lines up of mobile covers. Overall, it is learned that the GST has made simple for some of the handset and electronic.

Xiaomi India is afraid of increment of GST on Mobile phones

There was a 39th GST Council meeting The 39th GST Council meeting has been concluded on 14th March 2020 in New Delhi in the chairmanship of Union finance minister Nirmala Sitharaman and other panel ministers. Read more on Saturday, in which the GST on mobile phones has been increased from 12% to 18%. Because of this increment of 6%, buying a smartphone or mobile phone from April 1st will be expensive. It made smartphone manufacturer companies concerned about the prices and their reactions have started coming regarding this increment.

Xiaomi is currently the largest smartphone selling company in India and Manu Kumar Jain its Global Vice President of Xiaomi India, has tweeted from his official Twitter handle that” By increasing the GST rate from 12% to 18% Check out the GST rate on mobile phones, chargers and its accessories along with HSN code in India. The mobile phone HSN code is 8517 along with 12% GST rate. Read more, the mobile industry will crumble”.

He further wrote that “the smartphone industry is already under pressure due to the constantly falling Indian rupee. All manufacturer companies have to increase their smartphone prices. Because of this, the Make in India program of the Central Government will be affected”.

In another tweet, Manu Jain has written to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman for consideration of increasing the GST on mobile phones once again. He has also pointed out the trouble the telecom industry is already facing because of the impact of coronavirus on the supply chain. He further said that devices priced below $200 or ₹15,000 should be excluded from the new GST rate.

Not just Xiaomi, Vivo India’s director of brand strategy Nipuna Maraya has also reacted that, “We are evaluating the impact of the new tax structure and will decide on it in the next few weeks”.

Apart from mobile companies, some industry experts also believe that the increment in GST rate on mobile phones will affect the complete smartphone market and clearly the prices of mobile phones will increase rapidly.