The Need to Revise the GST rate on Mobile Phones
The Goods and Services Tax (GST) was introduced in India on 1st July 2017 with the aim of simplifying the indirect tax system. Under GST, mobile phones were placed in the 12% tax bracket, which was later reduced to 5% in July 2018. However, the rates were increased again to 12% in April 2020. Many industry experts believe that this hike in the GST rate on mobile phones needs to be revised. In this article, we will discuss why this revision is necessary.
Impact of High GST Rates on Mobile Phones
The high GST rates on mobile phones have adversely affected the industry and the consumers alike. Firstly, it has led to an increase in the prices of mobile phones. For instance, a phone that cost Rs. 10,000, was sold at a price of Rs. 11,200 (inclusive of 12% GST). This increase in price has discouraged many buyers from purchasing mobile phones. Secondly, the rise in GST rates without a corresponding increase in the disposable income of consumers has led to a reduction in demand for mobile phones. This has hit the industry hard, resulting in a decline in sales and profits.
Government’s Responsibility to Encourage Digital India
The Government of India has been promoting Digital India and has set a target of achieving 1 billion digital transactions per day. However, the increased GST rates on mobile phones go against this objective. The smartphone is the backbone of digital transactions in India, and making it expensive will hinder its adoption and use. By revising the GST rates, the government can encourage the adoption of digital transactions and further boost the digital economy.
Comparing GST Rates on Mobile Phones with Other Developed Nations
The current GST rate of 12% on mobile phones is significantly higher than that in other developed nations. For instance, in the USA, the tax rate on mobile phones is 0%, and in countries like the UK and Australia, it is between 5-10%. A high tax rate impacts the affordability of smartphones, which in turn affects the penetration of mobile phones in the population. Thus, it is essential to revise the GST rates to bring them in line with global standards.
Conclusion
The increase in GST rates on mobile phones has negatively impacted the industry and consumers. It has resulted in a reduction in demand and has led to an increase in prices, thereby limiting the affordability of mobile phones. The government should take the responsibility of promoting Digital India and encourage the adoption of mobile phones for digital transactions, which have the potential to revolutionize the economy. By revising the GST rates, the government can boost demand, increase sales, and promote digital transactions, furthering the country’s overall economic growth.
