Higher GST has been imposed on mobile phones in India, and this will indirectly add up to the cost making mobiles costlier in India. GST on smartphones has been increased from 12 percent to 18 percent.
While COVID 19 has already affected the supply chain, this will add up to the woes.
Recently Xiaomi was forced to increase the price of Redmi Note 8 in India due to supply shortage from China. The recent COVID 19 outbreak has directly affected the production of smartphones and its parts in China.
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New GST Imposed: Will This Be Helpful?
India has a massive market for smartphones, and it has been growing exponentially in the last few years. While the market is huge, there’s intensive competition in the market. The big players have been relying on thin margins for higher market share.
The huge Indian smartphone market is quite price sensitive, and the new GST will be affecting the sales directly.
Almost all smartphones in India are either assembled in India with the parts brought from China or directly imported from China. No device parts are manufactured in India, neither these big companies rely on any production facility in India other than assembling.
With supply shortages from China due to the COVID-19 and new GST, this will be affecting the demand of smartphones in India.
18% GST On Smartphones: Mobiles To Cost More?
While the supply shortage due to COVID 19 outbreak may be temporary, the 18 percent GST on smartphones will stay. This will push up the prices of smartphones and will directly hurt the Indian smartphone industry.
Manu Jain, Xiaomi India head said the smartphone industry in India “will crumble” due to the new GST.
Profit Still Remains Nascent: Can Companies Afford Another Blow?
The Indian smartphone industry may be growing and has a huge customer base, it is still struggling to make money. The profits are thin as companies are fighting to make space in the market, while the profit remains almost stagnant.
At the same time, the rupee continues to weaken against the dollar and thus it leads to higher import cost.
New GST To Affect Make in India & Disrupt Internet Penetration?
Big players such as Xiaomi or Realme all tend to assemble phones in India after they import components from China. Till now the GST on smartphones was 12 percent, while it was 18 percent on device components.
FM Nirmala Sitharaman previously mentioned the increase in tax will adversely affect Make in India programme and also disrupt the internet penetration.
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