By: Puneet Narang, director of Huawei`s consumer business group.
Business for the mobile phone industry is not the same after GST was rolled out. Post-July 1, both domestically manufactured and imported mobile phones, as well as mobile phone parts, are attracting a standard tax of 12 percent. Given how popular mobile phones are in India, how is the market impacted?
Mobile Retail Slows Down
Post the GST roll-out on July 1 2017, most sellers were apprehensive about the change in rates. Most of them downscaled operations to less than 100% of their capacity, and spent time becoming GST compliment instead of being concerned by a number of devices being sold. This meant retailers were hesitant to add new stock into channels through June despite assurances from original equipment manufacturers (OEMs) regarding inventory clearance.
Anticipation of Greater Domestic Production
A slew of new policies introduced by the GST regime is encouraging domestic production of mobile phones. For instance, the government had received representations requesting for concessions including 30% local sourcing of component, duty exemption on manufacturing and repair units, components, capital equipment and consumables for smartphone manufacturing and service or repair. The government has cleared that this relaxation of rules invalid for three years from the opening of the entity’s first outlet, after which they would have to follow domestic sourcing norms.
Higher Online Prices
The Goods & Services Tax has had its impact on mobile phones by online platforms since such ventures have stopped enjoying advantages over brick-and-mortar stores with the end of the differential tax rates (VAT) throughout the country. If you compare rates of all major models on portals like Flipkart or Amazon, you’ll find they cost as much, perhaps a little more, than they would in a shop. That said, the online portals are splashing out grand sales to attract customers.
Mobile manufacturers including components makers, contractors, and other giant producers are under the middle way towards a staggering investment of a thousand crore into the Indian smartphone industry because of the goods and service tax regime. Samsung alone is set to make an investment of Rs 5000 crore for its Noida based plant by 2020.
Mobile Use Now Dearer
With the GST regime in place the tax liability on telecom services has gone up from 15 to 18 per cent. This implies higher costs for the consumer who has to pay more for data plans. But Digital India is on track with an increase in the popularity of talk-time and data management apps. How this impacts mobile sales, and manufacturing, is yet to be seen.