Increasing GST on mobile phones to 18 per cent from 12 per cent at the time of economic slowdown coupled with coronavirus outbreak will derail the industry and lead to job losses, industry body ICEA said on Sunday.
The India Cellular and Electronics Association said the decision will put a burden of Rs 15,000 crore on common man and adversely impact over 100 crore Indian consumers.
"When coronavirus is spreading panic, economic slowdown is at its peak, consumer sentiment is battered and stock markets are in free-fall, increasing GST is both counter-intuitive and insensitive. This will lead to immediate job losses and severely dampen future investments in manufacturing," ICEA Chairman Pankaj Mohindroo said in a statement.
He said that till June 2017 consumers were paying 4-5 per cent value added tax and 1 per cent on excise duty and later they were burdened with 12 per cent GST which has been further increased to 18 per cent.
"The 18 per cent GST hike will also bring back the bad old days of early 2000s when the grey market in mobile phones was rampant at 90 per cent. It reverses years of painstaking efforts by governments and industry to increase mobile manufacturing and penetration by sensible policy interventions and tax rationalisation," Mohindroo said.
He said this move will also prove to be disastrous for the already fragile retailer community wherein lakhs of small and mid-sized retailers survive by selling mobile phones.
A top official of the country's leading smartphone seller Xiaomi had said on Saturday that smartphone makers will be forced to increase handset prices with this hike in GST.
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"As a result of this GST increase, all smartphone makers will be forced to increase prices. This can weaken the demand and mobile industry's Make in India programme. This could also have long lasting impact on internet penetration and digital India program as majority of Indians access the internet on smartphones," Xiaomi India Managing Director Manu Jain said.
ICEA said that the GST hike is contrary to Prime Minister Narendra Modi's vision to make India the world leader in mobile phone manufacturing.
Mohindroo said that with hike in GST, it will be difficult to achieve even half the target of USD 80 billion domestic production of mobile phones in the country by 2025 set under National Policy on Electronics 2019.
Mobile manufacturing production in the country increased five-folds and revenues 10-folds from 58 million units valued at Rs 18,900 crore in 2014-15 to 290 million units valued at Rs 1,81,200 crore in 2018-19.
"The government revenues post GST had doubled from Rs 10,900 crore to Rs 20,700 crore within two years. 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," Mohindroo said.