The Indian Government seems to be a little aggressive about the new tax schemes. Recently the Goods and Services Tax council of India decided to increase the tax rate by 6% over the existing 12% tax rate. The new tax rate of 18% will apply to anything related to the smartphone industry that also includes the components or parts of the smartphones.
The GST council of India is raising the taxation rate on mobile phones to meet the existing rate on raw material and components used in the manufacturing of the smartphone. India has already slapped on an 18% GST rate on raw materials used for manufacturing smartphones. The current tax rate on the final product was, however, 12%. This was leading to an inverted pyramid of the tax system. In a move to rationalize taxes, the council has increased taxes on mobile phones to match the 18% GST on components. Inevitably, this will lead to an increase in the cost and financial burden on the end consumer.
Manu Kumar, Xiamoi India MD has requested the Indian Government to reconsider this new tax update. According to his latest tweet, he has suggested that the industry is already struggling with depreciating INR and supply chain disruption due to covid-19. He further said that govt should at least consider exempting low-budget smartphones that used to cost under $200. The covid-19 had hugely impact the smartphone and many industries to in fact.
This new tax will further enforce more damage to one of the fastest-growing industries in India. In a memo to the GST council, the Indian Cellular and Electronics Association has raised the issue, but it remains to be seen whether any exemptions will be made to keep prices low, especially in the popular sub-Rs. 15,000 segment.