GST Regime Might Lead To A Steep Rise In Smartphone Prices

The Goods and Services Tax reform will reportedly be bringing major changes in the tax structure of the country. The prices of Smartphone and other devices by companies like Apple and Samsung could also experience a hike.

The Goods and Services Tax reform is expected to roll out by 1st July 2017. With this reform, the government intends to subsume a major part of the indirect taxes, replacing them with a more homogenous tax structure in India.

As per a report by Economic Times, the proposed regime may lead to a hike of 15-25% in the price of smart phones. This move by the government is aimed at boosting local manufacture, to encourage companies like Apple to set up manufacturing units in India and also keeping Chinese manufacturing companies at bay.

To conduct a detailed analysis of the issue, an inter-ministerial committee comprising a representative of finance, IT, commerce and telecom ministries, has been set up. Also, Finance Minister Arun Jaitley has suggested removing the countervailing duty imposed on electronic parts from overseas. This would bring down input cost for local manufacturers.

Prime Minister Narendra Modi's "Make in India" program has aided quite a few Smartphone companies in setting up assembling units in India. Among these companies are Lenovo, Huawei, and Motorola. The assembling units are roughly 40 in number and together they manufacture about 20 million phones every month. Top News Today says that the value of phones assembled in India has increased by a massive 373% in the past two years, going from Rs. 190000 million in 2014-2015 to Rs. 900000 million in 2016-2017.

Union IT Minister, Ravi Shankar Prasad stated that over the last two years, 72 global telecom companies had started production in India. Prasad is also due to meet Apple's officials soon to negotiate on tax return concessions for setting up their manufacturing unit in India.

The steep hike in prices of Smartphone would cause hiccups among Indian customers for sure. However, it could be a positive change in terms of boosting the local manufacturing of goods.