BIG: Mobile phones to get more expensive; GST council hikes tax from 12% to 18%

In a major decision, the GST council on Saturday has decided to increase the Goods and Services Tax on mobile phones from 12% to 18%, announced by Finance Minister Nirmala Sitharaman in a press conference. The GST council Meet which was held on March 14 has accepted the proposal to raise the rate. This move will potentially raise the cost for the consumers. 

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GST council raises mobile phones rate to 18%  

"GST rate on mobile phones and on specified parts which were currently attracting at 12% to be taxed at 18%," she said. She added, "A completely enhanced capacity, better system of GSTN with capacity enhancement, with better staff response, better solutions, envisaged and proposed by Nandan Nilekani, has now been decided by the council that it should be completed by July 2020 instead of January 2021. The committee had listened to several issues raised on inversion rates and raising tickets, but only those on mobile phones.

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How will raised GST rates affect mobile industry?

Reports state that the mobile industry had asked to slash the GST rates on certain components used to manufacture mobile phone to 12% from 18%. Moreover, the All India Mobile Retailers Association (AIMRA) had stated that an increase of 6% GST will break the crippling mobile retail industry, as per reports. Currently, the industry is suffering due to low consumer demand and the AIMRA had stated that the increase in the GST will lead to a hike in prices of the product.

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Reports further state that the GST council has hiked the rates to correct the inverted duty structure which currently levies a lower duty on the end product - the cellphone, than its input - the components. AIMRA has reportedly warned that increased GST will lead to huge losses to the traders who have already stocked products paying the previous rate of 12%. They may have to shell out the additional 6% due to inflated rates.

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