The government’s GST hike on mobile phones from the existing 12 % to 18 % will adversely impact the government’s boost to increase mobile manufacturing in the country.
India Cellular and Electronics Association (ICEA) has come out with a statement opposing the decision. “When coronavirus is spreading panic, the 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,” ICEA Chairman Pankaj Mohindroo said in the statement.
It is to be noted that recently in one of its biggest incentive schemes, the government announced Rs. 42,000 crore production-linked incentive package to boost domestic mobile manufacturing. The incentive scheme seeks to offer an incentive of 4-6 percent on incremental sales of locally manufactured mobiles for a period of five years.
The incentive is available on smart phones priced over Rs. 15,000 while mid-range phones are left out of the purview of the scheme leaving mid-range manufacturers grunting
The increased GST increase will nullify the incentive benefit of premium phone manufacturers while this decision will add up to the woes of the mid-range phone manufacturers who will bear most of the brunt as the GST increase will force them to increase prices affecting sales.
According to ICEA, the decision will impose a burden of Rs 15,000 crore on customers and hugely impact over 100 crores, Indian consumers. Consequently, this decision is expected to weaken the ‘Make in India’ sentiment among mobile phone manufacturers as they apprehend slowdown in investment spree and job losses in the effect.
