Industry body calls for reducing GST on phones, parts

The India Cellular and Electronics Association (ICEA), in a letter to various chief ministers, has said that the GST rates on mobile phones should be brought down to 12% and on parts and components to 5%, from 18% on both in April 2020. states.

The industry is in a “shock state” due to the government’s decision to implement 18% GST on mobile phones last year, according to a report by the industry body, which counts companies such as Apple, Foxconn, Xiaomi and its members. .

This is not the first time the industry has raised this concern. The Center increased the GST on mobile phones from 12% to 18% in April 2020, leading to a 5-10% increase in the prices of some smartphones. Xiaomi India Managing Director Manu Jain tweeted at the time, “Increasing GST for phones from 12% to 18% will cripple the industry.”

ICEA President Pankaj Mohindroo said, with the GST hike, demand has been “disrupted”. As per the ICEA report, the rate should ideally be 5% and never exceed 12%. “The government has realized the importance of mobile phones in the development of the digital agenda. The rates of mobile phones and parts should be rationalized and, as explained in this report, 12% should be brought back on mobile phones and with This, removing the inverted fee structure,” said Bipin Sapra, partner, EY.

Around 2017, the tax on mobile phones in states like Bihar was 5%, Mohindroo said. In the era of GST, the tax on one thousand rupees smartphone has increased. from 50 180, he said, which is about 10% of the phone’s price. “These are very sensitive segments. Therefore 130 (the additional amount in the form of tax) has a huge impact on the individual.”

The report said an “unintended consequence” of the move from the old to the new tax regime was that it did not provide “any incentive to manufacturers”.

“Ideally, since manufacturing activities contribute to higher economic growth through local value addition, employment of the workforce and support services, tariffs should be considered to provide inherent advantages and cost competitiveness to domestic manufacturers over traders,” the report said. should be designed for.”

Mobile phone makers have also had to increase the prices of devices due to lack of supply and shortage of chips.

According to data from International Data Corporation (IDC), the smartphone market in India fell 12% with shipments of 48 million units in the quarter ended September 2021. IDC said the decline was due to a reduction in demand during the same quarter in 2020 and global shortages of chips and industry supply constraints.

Market leader Xiaomi last week hiked the price of its budget Redmi 9A and Redmi 9A Sport smartphones by about 5%, saying it had to do so due to a massive demand-supply gap.