The global smartphone shipment is expected to experience some decline due to the Coronavirus epidemic that is sweeping through several countries. In the face of this situation, India’s Goods and Services Tax (GST) Council has hiked the Goods and Services Tax payable on mobile phones from 12 percent to 18 percent. The new development was announced by the GST Council during a meeting in New Delhi today. This would likely result in a rise in the prices of smartphones in the world’s third-largest smartphone market.
The council reportedly skipped the proposal to also increase the rates on fertilizers and footwear citing the slumping economy and impact of the COVID-19 pandemic. The tax increase on mobile phones is said to have been necessitated by the fact that the mobile phone industry is one of the sectors that had less impact from the prevailing economic slowdown in the Asian nation.
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India’s Cellular and Electronics Association (ICEA) had earlier appealed against increasing the tax on mobile phones. The industry body had argued that the increase in GST would be detrimental for consumer sentiment and would have an effect on the local manufacturing of smartphones. Even the country’s mobile retailers association had also appealed against increasing tax which they say would impact on their already low margin.
The Indian market was among a few markets that experienced slight growth in the face of a global decline in growth. This could be attributed to modest pricing as a result of the government’s “Make in India” initiative. The increased tax could negatively impact on this gain as it could affect domestic patronage.
IDC India’s Navkendar Singh, Research Director, Client Devices & IPDS believed the decision will affect getting more persons coming in the smartphone fold. ”Despite being the fastest-growing smartphone market in the world, India still has a long way to go with an estimated penetration of around 400 million people out of 1.6 billion having access to smartphones in the country.“Considering the current supply and projected demand scenario in the next couple of quarters, brands are not in any position to absorb this hike. They will be forced to pass it onto the consumer, which will further increase the replacement cycle (which has been a major engine of growth in the market for the past couple of years),” says Singh.
