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Handset companies say GST hike will hit jobs, consumers

Handset makers and mobile retailers said the proposed GST hike on mobile phones is a “counter-intuitive and insensitive” move that will place an additional burden of ₹15,000 crore on the consumers

, ET Bureau|
Last Updated: Mar 16, 2020, 07.15 AM IST
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NEW DELHI: Handset makers and mobile retailers said the proposed GST hike on mobile phones is a “counter-intuitive and insensitive” move that will place an additional burden of ₹15,000 crore on the consumers, lead to immediate job losses and severely dampen future investments in manufacturing.

“To strike the sector with a higher GST at this stage is the equivalent of killing the goose that lays the golden egg. Not a savvy move by any stretch,” India Cellular and Electronics Association (ICEA) said in a statement on Sunday.

The decision to hike GST on mobile phones to 18% from 12% was taken at the GST Council meeting chaired by finance minister Nirmala Sitharaman on Saturday.

The move was made to correct the inverted duty structure. Handset makers, however, said the rationale of correcting inverted duty structure by increasing GST is misplaced.

Manu Kumar Jain, global vice president and managing director of Xiaomi India, said in a statement to ET that the rate hike will seriously harm the entire industry. “As a result of the GST rate increase, all smartphone makers will be forced to increase prices, which can weaken the demand… the industry is already struggling with profitability due to depreciating rupee, and the Indian smartphone industry is facing supply chain disruption due to the current Covid-19 situation,” Jain said.

Vivo India’s director-brand strategy Nipun Marya said they are evaluating the impact of the new tax structure.

ICEA, which represents the likes of Xiaomi, Oppo, Vivo, Apple, Lava and Foxconn, said the move move will also prove disastrous for the already fragile retailer community wherein thousands of small and mid-sized retailers survive by selling mobile phones.

Industry associations like ICEA, Confederation of All India Traders (CAIT) and All India Mobile Retailers Association (AIMRA) are joining forces to demand a roll back. The associations and companies expect to raise concerns with the finance minister, saying only one state—Uttar Pradesh—wanted the rate hike.

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