GST hike, economic slump to derail mobile industry: ICEA

New Delhi, Mar 15 (IANS) | Publish Date: 3/15/2020 11:14:47 AM IST

 India’s leading mobile industry association, ICEA has expressed shock and disappointment over the proposed increase in GST on mobile phones from 12 per cent to 18 per cent.

The main criticism is over the timing and the resultant increase in prices.

Unless the proposed GST hike is reversed, it will place an additional burden of Rs.15,000 crore on the common man, adversely impact over 100 crore Indian consumers.

When coronavirus is spreading panic, 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.

Till June 2017, most consumers were paying a VAT of 4-5 per cent and 1 per cent excise duty on mobile phones.

The 12 per cent GST on mobile phones in place of VAT was already a massive hike in taxes at a time when GST was aimed at reducing the tax on consumers. With 18 per cent GST, the extremely price sensitive Indian consumer will either delay their purchase or buy in the grey market.

The 18 per cent GST hike will also bring back the bad old days of early 2000s when the grey market in mobile phones was rampant at 90 per cent. It reverses years of painstaking efforts by governments and industry to increase mobile manufacturing and penetration by sensible policy interventions and tax rationalisation.

This move will also prove to be disastrous for the already fragile retailer community wherein lakhs of small and mid-sized retailers survive by selling mobile phones. The retailers are already suffering due to the economic slowdown.

They will now come under further pressure. Thousands of retailers have already shut shop over the last two years and thousands more will face closure due to the proposed GST hike.

Mobile manufacturing had shown excellent results where the industry had increased production 5X and revenues 10X from 58 million units valued at Rs.18,900 crore in 2014-15 to 290 million units valued at Rs.1,81,200 crore in 2018-19. 

The government revenues post GST had doubled from Rs 10,900 crore to Rs 20,700 crore within two years.


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