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India Cellular & Electronics Association (ICEA) and EY, in a report on Tuesday, have said that there is a need to rationalise goods and services tax (GST) on mobile phones to 12 per cent, and parts and components to five per cent.
ICEA, the mobile and electronics industry body, said that rational indirect taxation -- VAT and excise duty which cumulatively was between six and eight per cent for over a decade and a half, was one of the reasons that the mobile industry flourished.
In most products and commodities, India's share of global markets is around three per cent which is in sync with our share of global GDP (3.2per cent), but in mobile phones, our value share is over five per cent. Rational taxation was one of the reasons for the same, it said.
In the report -- 'A consequential GST step: Boon or Bane for Mobile Handset Industry?', ICEA and EY said that the 18 per cent GST rate on mobile handsets has a trickle-down effect leading to the rise in prices for the consumer, which in turn is decreasing the demand for mobile phones.
“This report captures all the focal points for policymakers that highlight the increase in GST rates of mobile handsets and its parts and components. I am confident that this study will be insightful on the importance of mobile phones, and it will give the government adequate information to rescind the increase in the GST for mobile phones. Affordability will be key to India reaching $80 billion size in the domestic market by 2026, and GST rates will play an important role,” Pankaj Mohindroo, Chairman, ICEA, said.
The Indian mobile phone industry has witnessed a rapid stride in the past few years. Mobile phone subscribers have crossed the one billion mark, and the monthly sales of mobile phones have consistently been between 20-27 million in numbers, he said.
“The government has realised the importance of mobile phones in developing the Digital agenda. The rates for mobile phones and parts must be rationalised, and as highlighted in this report, brought back to 12 per cent on the mobile phones and simultaneously removing the inverted duty structure,” Bipin Sapra, Partner EY said.
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