Most mobile phones may get costlier by 4-5 per cent with the government imposing a goods and services tax (GST) of 12 per cent, taking away the benefit under duty differential that was being offered to local manufacturers.
Experts said 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.
Under the government’s Make in Indian push, around 80 per cent of 59 million phones sold in India in the January-March quarter were made locally, up from 65 per cent in 2016 when 265 million phones were phones, as per Counterpoint Research.
Some 40 odd phone manufacturing plants have come up since, including 15 component making units, including Flex, Wistron and Foxconn.
According to rates fixed by the GST Council on Thursday night, ‘Telephones for cellular networks or for other wireless networks and parts for their manufacture’ will attract a rate of 12 per cent. So while imported phones will become cheaper, most of the locally manufactured phones will get costlier.
Gujarat, Madhya Pradesh and Maharashtra, may not see price drops even though they have VAT rates between 12.5 per cent and 15 per cent, as they subsidize to avoid grey marketing, while prices may not rise in Punjab, Rajasthan and Chandigarh that have rates of 8 per cent-9 per cent.
For mobile phones imported and sold in India, duty was from 17 per cent going upto 27 per cent, which now comes down to 12 per cent, giving imports a leg up. And those made in lower VAT states would be priced higher to match up to 12 per cent GST.
Prices of mobile phones at e-commerce players like Amazon, Flipkart, Snapdeal, Shopclues and others, where sellers of mobile phones have been supplying from low VAT states, primarily Karnataka, may now be higher than earlier.
By Baishakhi Dutta
