Mobile Phone Sales to Be Hit, Say Industry Experts, as GST Hike Makes Them More Costly

With the GST Council, headed by Finance Minister Nirmala Sitharaman, increasing the GST on mobile phones from 12 percent to 18 percent on Saturday, industry experts feel it would hit the industry and the consumers hard.

Brands are in no position to absorb this impact. "They will, most certainly, decide to pass it on to the consumer, at least in case of high-selling models," said Navkendar Singh, Research Director, IDC India.

The India Cellular and Electronics Association (ICEA) stressed that the move would stymie consumption.

"The 6 percent GST increase will be detrimental to the vision of 'digital India'. Consumption will be stymied and our domestic consumption target of $80 billion (Rs. 6,00,000 crores) by 2025 will not be achieved. We will fall short by at least Rs. 2,00,000 crores," said Pankaj Mohindroo, ICEA Chairman.

In a letter to the Finance Minister on March 12, the ICEA had said the mobile handsets sector was in deep stress because of the supply chain disruption due to coronavirus outbreak. It was the most inappropriate time to consider GST hike on mobile phones, the industry body said.

It also said the GST hike on mobile phone might adversely affect localisation of manufacturing as well as popularisation of the country's digital payments objectives.

According to ICEA, 31-32 crore Indians who buy phones in the country will be impacted by the move.

Terming the move counter-intuitive and detrimental to the 'digital India' vision, the IDC India Research Director said, "This is a textbook case of missing the wood for the trees. This will stunt any hope of growth in the near-term, which anyway looks challenging now due to coronavirus issue at both supply and demand ends," Singh told IANS.

The coronavirus outbreak, which has hampered global tech giants' 2020 plans leading to cancellation or postponement of global flagship conferences, is set to hit supplies of smartphone components from China to India at least till the second quarter of this year.

According to Tarun Pathak, Associate Director, Counterpoint Research, India smartphone market will see at least 15 percent shortfall in shipments in the first quarter (January-March period).

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