Smartphone prices in India set to increase as GST on components hiked from 12% to 18%

Representative Image (Reuters)

The novel coronavirus pandemic has rattled the tech world, forcing several OEMs to shut their manufacturing plants. Now, the smartphone industry is set to face yet another hurdle in India.

The price of smartphones in India is set to go up as the GST Council has decided to raise the Goods and Services Tax (GST) from 12-percent to 18-percent on April 1. According to the Government of India, this is to correct the inverted duty structure. Finished phones are currently taxed at 12 percent while components to build phones are taxed at 18 percent.

Manu Kumar Jain, MD of Xiaomi India, states that an increase in GST will "crumble the industry", considering that it is still recovering from supply chain disruption caused by the coronavirus outbreak. Jain tweeted to the Prime Minister urging him to exempt phones that cost less than Rs 15,000.

My humble request to Hon. PM @NarendraModi ji and FM @nsitharaman ji - please reconsider this #GST hike.

The industry is already struggling with depreciating INR & supply chain disruption due to Covid-19. At least all devices under $200 (=₹15,000) must be exempted from this. https://t.co/hOMpSpTyKk — Manu Kumar Jain (@manukumarjain) March 14, 2020

Jain isn’t the only one against the change, with various organisations coming out in protest. The ICEA chairman has warned that the domestic consumption goal of $80 billion by 2025 will be missed by $25 billion. The president of the Telecom Equipment Manufacturers Association of India has also stated that a better way to correct the inversion would be to drop the component tax rate to 12 percent. The All India Mobile Retail Association says that the move will be detrimental to the retail industry.