GST hike to make smartphones in India more expensive

Trade around the world is already being severely impacted by the novel coronavirus pandemic. China’s shutdown has lead to serious shortage of supplies across many industries. Amidst this torrent of bad news, the Indian government’s GST Council headed by the country’s finance minister Nirmala Sitharaman has just hiked the GST (Goods & Services Tax) on specific parts of mobile phones to 18% from 12%.

This is not only a big blow to consumers but also to the phone brands and the mobile phone industry as a whole in the country. The secret behind India’s recipe to grab the second position in the smartphone industry is the availability of affordable budget smartphones. Thus, even a 6% jump in GST on mobile phones is a lot to take and it has the potential to hamper the fast-growing phone industry in India.

Only yesterday, Xiaomi India’s COO Muralikrishnan assured the COVID-19 outbreak will not affect the firm’s smartphone business in the country. But today, Manu Jain, the company’s Indian head (CEO) tweeted to Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman to at least exempt smartphones under INR 15,000 (~$200) from this new GST rate, which is set to go live from April 1. We expect more companies to come forward together in this regard soon as it affects the whole industry as we mentioned earlier.

India has been a key market for smartphone companies for a while now. In 2019, the country even surpassed USA to become the world’s second-largest smartphone market with 158 million shipments as per a report by Counterpoint. The government’s ‘Make in India’ scheme along with ease of doing business in the country helped to achieve this feat. But unfortunately, that might change soon as the GST levied on mobiles phones have been now incremented from 12% to 18%. Above all, the country is already going through economic slowdown for several quarters now.