Global chipmakers have already warned of a supply crunch for most of 2022 and extending into 2023. Most smartphone makers have had to postpone their launches and often hike prices as a result of higher component costs. This means customers have to fork out a few dollars more to get their hands on their favorite smartphone.
In an effort to soften this blow, one of India's apex mobile and electronics bodies has sought a reduction in government taxes so that over the next 12 to 24 months, the sales of mobile devices do not get stymied. In fact, the India Cellular and Electronics Association (ICEA) jointly brought out a report with EY that calls for a policy impetus to ensure that mobile device and accessory prices remain affordable.
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In fact, when global smartphone shipments were showing signs of recovery, their numbers declined by two per cent year-on-year in India during the third quarter of 2021 ending September 30. Overall shipments amounted to 52 million units during the three months with the dip resulting in spite of the robust festival sales over two months of the relevant quarter.
They specifically suggested that the GST on smartphones be reduced from 18 per cent to 12 per cent and spare parts and components be taxed by 5 per cent. This rationalization, the study claimed would induce growth in the industry.
In a press statement, the ICEA says, “This increase in the GST rate has a trickle-down effect leading to the rise in prices for the consumer, which in turn is decreasing the demand for mobile phones. Affordability will be a key to India reaching an 80 billion USD size in the domestic market by 2026, and GST rates will play an important role."
Mobile phone subscribers have crossed the one billion mark, and the monthly sales of mobile phones have consistently been between 20-27 million with production increasing from 60 million units valued at ₹19,000 crore in 2014-15 to 330 million units valued at ₹2,20,000 crore in 2020-21.
The mobile manufacturers' body said the 12 per cent GST rate on mobile handsets increased tax by almost 50 per cent in this sector from a prevailing national average rate of around 8.2 per cent (pre-GST era). The industry was emerging from GST with a tax increase, when the federal government again hiked GST to 18 per cent. The ICEA asked state governments to cut GST rates to bolster sales growth.
India has just closed its festive season online sales that touched $9.2 billion in 2021, representing a 22 per cent growth over the 2020 sales numbers. In rupee terms, the sales during August-November clocked approximately Rs.65,000 crore. A research report said smartphones were the top selling item across online retail stores, with as much as a third of the total sales.
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