GST Effect: Mobile Phone Prices Won’t Hit Your Pockets from July

The GST may hit local brands like Micromax who will be end up paying the same tax rate as those who import.

There’s relief for those looking to buy smartphones in India. You won’t have to bear any extra cost of the impending rollout of the Goods and Services Tax (GST) on 1 July.

Instead, there’s a discount mela that is being offered by sellers.

Short-Term Pain, Long-Term Gain

Multiple industry experts say that the impact of GST will have a positive effect in the long term, but for now, manufacturers as well as sellers will have to brave the storm for a better future.

From a long-term perspective, the GST slabs for mobile is a good move. This gives people who are in the mobile business more clarity as to how the taxation stands.

Tarun Pathak, Telecom Analyst, Counterpoint Research 

Companies will invest less on imports and manufacturing over the next two months, directly impacting sales.

However, he was quick to point out that discounts up to 10 percent are in order because dealers will push to clear their inventory.

In the short term, the impact will hit shop sellers, who might have to offer phones at discounted prices to clear their stock.

Tarun Pathak, Telecom Analyst, Counterpoint Research 

When quizzed about the impact of GST having on e-commerce players’ strategy, Pathak said that competition will continue to force these companies to offer products at lower prices in order to acquire consumers.

Online space is run by competition between two players, so they will continue to offer products at lower prices than offline sellers. 

Tarun Pathak

Same Tax for All — What’s The Point of Make in India?

The other curious thing that we bumped into from the GST announcement was the disadvantage that local players have to bear, compared to its global peers.

Currently, the tax slabs are divided into two parts, according to Pathak. Those who are importing pay 12.5 percent tax, exclusive of other duties. And brands which are not importing, they were paying 1 percent tax, he adds.

There has always been a duty differential of 11 percent which has been handed out to the buyers who are assembling in the country

Tarun Pathak

But from July onwards, the tax slab is universal for everyone, which directly impacts local brands like Micromax, Lava and others. To offset the impact, the Ministry has promised various incentives which are likely to be offered to them in months time, according to Tarun.

Ministry has promised to take care of local players via incentives of various forms. Cash incentives not good enough, they need to bring back custom duties to some extent.  

Tarun Pathak, Telecom Analyst, Counterpoint Research 

But if the incentives don’t come through before July, he indicates that the discounts of 5-10 percent will give way to price hike of mobiles after that.

To put things in perspective, he expects the tax transition to take more than a month, for dealers to understand the impact of the changes that have been announced last week.

(This article has been updated.)