A couple of weeks ago, the Indian government announced that mobile phones will fall under 18 percent GST slab, increasing the tax rate by 50 percent. Previously, the GST rate for mobile phones was set at 12 percent in India.

While several industry leaders complained about the change and requested the government to reconsider the decision, there has been no change yet. As the new tax rate takes effect from today, i.e. 1st April, smartphone manufactures have now increased pricing in India.

Xiaomi has announced that the pricing for Mi and Redmi branded smartphones in India has been increased following the 50 percent hike in GST. The company says that it has no choice other than hiking the prices of their products with the new GST rates in place effective today.

The company also cited the continuous depreciation of the Indian rupee against the US dollar as one of the reasons to hike pricing. Xiaomi has said that the newly updated pricing will soon appear for devices on Mi.com.

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Another smartphone brand that increased pricing is OPPO but the company has not yet officially announced this move. As per the report, it has started notifying dealers and partners across the country about its plan to increase pricing.

It seems that the company could not have picked up the worse day to announce this price hike given that today is April Fool’s day and many will consider this announcement from Xiaomi to be a joke. But, to be clear, this is not a joke and the prices for Xiaomi’s smartphones have gone up on Flipkart.

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(Sources — 1, 2)

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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.

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