It stressed that mobile phone subscribers have crossed the one-billion mark
Several handset makers along with the electronics council India Cellular & Electronics Association (ICEA) have requested for the 18 percent GST applicable on mobile phones to be brought down to 12 percent, along with a 5 percent decrease for parts and components.
ICEA, along with EY, submitted a report asking for the reductions, adding that the 12 percent GST rate on mobile handsets increased tax by almost 50 percent in this sector from a prevailing national average rate of ~8.2 percent (pre-GST era). The industry was emerging from GST with a tax increase, and the Government once more increased the rate by another 50 percent when it hiked it to 18 percent.
This increase in the GST rate has a trickle-down effect leading to the rise in prices for the consumer, which in turn is decreasing the demand for mobile phones, ICEA said, adding that is becoming a deterrent to the government’s Digital India initiative.
“This report captures all the focal points for policymakers that highlight the increase in GST rates of mobile handsets and its parts and components. I am confident that this study will be insightful on the importance of mobile phones, and it will give the government adequate information to rescind the increase in the GST for mobile phones. Affordability will be key to India reaching $80 billion size in the domestic market by 2026, and GST rates will play an important role,” Pankaj Mohindroo, Chairman, ICEA, said.
It stressed that mobile phone subscribers have crossed the one-billion mark and the monthly sales of mobile phones have been consistently in the range of 20-27 million units.
“Rational indirect taxation, i.e. VAT and Excise duty which cumulatively was between 6-8% for over a decade and a half, was one of the reasons that the mobile industry flourished,” it said.
“In most products and commodities, India’s share of global markets is around 2-3 percent which is in sync with our share of Global GDP, i.e. 3.2 percent, but in mobile phones, our value share is over 5 percent. Rational taxation was one of the reasons for the same,” ICEA said.
In April last year, the government had announced that increase in GST rates.
“Mobile phones and specified parts to attract 18% versus 12%. All other items, if there’s a need to calibrate the rates, to remove the inversion, we can take them up in future, examination of that can happen at a later time,” finance minister Nirmala Sitharaman had said then.
“The Government has realized the importance of mobile phones in developing the Digital Agenda. The rates for mobile phones and parts must be rationalized, and as highlighted in this report, brought back to 12 percent on the mobile phones and simultaneously removing the inverted duty structure,” said Bipin Sapra, Partner EY.