The goods and services tax (GST) council has announced a hike in the tax rate on mobile phones and specified parts to 18 per cent from 12 per cent, to correct the inverted duty structure.
The new rate will come into effect from April 2020.
However, the India Cellular and Electronics Association (ICEA) has stated that hiking GST on mobile phones will be detrimental for consumer sentiment and will impact local manufacturing. As per the industry body, the proposal to hike GST on mobile phones is not in the interest of the consumers, trade, industry or the nation.
Further, in a letter dated March 12, 2020, to the finance ministry, ICEA said the sector is already under deep stress because of disruption in the supply chain due to the coronavirus outbreak. It is a very inappropriate time to consider hike in GST rate of mobile phones from the current level of 12 per cent.
Instead of correcting inverted GST by rationalising GST on parts, components and inputs of mobile phones, a bizarre move to increase GST on the final product is being considered, ICEA added in its letter.
According to ICEA, around 310 million -320 million Indian buyers of phones will be impacted by the move.
With this move, it may be difficult for India to achieve its vision of being a manufacturing hub, unless the GST rate on handsets is retained at the current level of 12 per cent, added ICEA.