Under the Modi administration, India has made an effort to promote the production of goods and services in the country under the “Make in India” slogan. In a recent move by the Goods and Services Tax Council of India, it is reported that the smartphone industry is going to get the raw end of the deal. The council has decided to increase the rate by 6% over the current 12% tax rate.
The move of raising the taxes against smartphones has been made to ease the balance of payment on raw materials and components. So far, India has levied an 18% GST rate on raw materials used to manufacture smartphones. In a bid to rationalize taxes, the council has raised taxes on mobile phones to match the 18% GST on parts. Sooner rather than later, this will lead to an increase in prices across the board.
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Managing Director of Xiaomi India tweeted about the development and voiced his concerns
Smartphone manufacturers are having a hard time settling to the fact that they are using India as a manufacturing hub. The declining value of the INR VS USD, cut-throat competition and the disrupted supply chains due to Coronavirus outbreak means that the profit margins are minimal. Brands will resort to a price increase to bridge the gap.
In a memo to the GST council, the Indian Cellular and Electronics Association has raised its concerns but whether they get some concession or exemption is yet to be seen.
The new tariffs will be in effect from April 1, 2020.