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Is GST a bad news for Smartphones?

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As the new GST taxation system kicks in, the price for lots of consumer goods has fluctuated invariably, a glimpse of which can be found in our exclusive coverage on GST. Meanwhile, the aftermath has left smartphone market on a rise in prices; which are probably getting costlier by 4-5%.

Local Manufacturing = No Benefit

Experts said the government will have to come up with incentives by July 1 to ensure that make in India remains an attractive proposition for contract manufacturers like Foxconn.

Also, mobile users will have to shell out an extra Rs 30 if their monthly phone bill is Rs 1,000, as the tax rate on telecom services will go up from existing 15 per cent to 18 per cent.

This means that locally manufactured smartphone devices will be more expensive as they currently operate under lower tax rates due to benefits provided for local manufacturing.

About 80 per cent of the 59 million phones sold in India in January-March were made locally, as per Counterpoint Research. This means that 4/5th phones were either locally manufactured or were assembled in India and it poses a grave threat to the mid-range mobile buyer.

Experts are hailing GST as one of India’s greatest indirect tax reforms ever. But, at the same time, they are wary about some of the changes that the one-tax-to-rule-them-all regime could bring to the nation. At least, in the short term.

The government, of course, wants them to look at the broader picture. The long-term benefits of GST – much like the demonetisation drive – are immense, the Finance Ministry chaired by Arun Jaitley argues.

Imported Phones = Pretty Expensive

As for the smartphones that are imported from outside the country? The Government claimed that it may be levying customs duty of at least 10 percent on imported mobile phones (and accessories) under GST to safeguard (and retain) benefits passed on to local manufacturing. But it is yet to make an official announcement on the same.

Telecom services, until GST happened, attracted 15 per cent services tax. Under GST, they will attract tax rate of 18 percent. Coupled with the fact that the cost of buying a new mobile phone is also set to go up post GST, expenditure on mobile phones and accessories may be prevalent in the foreseeable future as well.

iPhones

The GST Impact On Your Smartphone

India is still the most expensive place to buy an iPhone. Even the made in India iPhone SE costs a lot of money. However, it is believed that with the coming of GST, Apple iPhones, iPads, iMac, MacBook and other products by the Cupertino major gets a major price cut, by almost 7.5 per cent.

As a GST impact, iPhone 7 (256GB storage variant) was available at Rs 92,000 post GST. But is now up for sale on the company website at Rs 85,400, which is almost Rs 6,600 lesser.

The Road Ahead

In almost all other cases phone prices are expected to rise even in the e-market sector. Elsewhere, several smaller smartphone and consumer electronics retailers across the country are selling products at pre-GST rates by issuing backdated bills, either to clear out old inventory or because they are not yet ready to move to the new system.

If you’re planning an upgrade, it may be wise to offset your increased expenditure by perhaps selling your current device for some quick bucks.