India Cellular and Electronics Association (ICEA), the apex industry body of mobile and electronics business has written letters to the Union Finance Minister Nirmala Sitharaman and all major states pleading with them not to increase the GST rate on mobile handsets. It reasoned that a hike in taxes on cellphones will not only disrupt rapid internet penetration in the country, it will also affect Make in India initiative as well as the adoption of digital payments. “We have written letters to major states asking them not to increase the GST rate”, Pankaj Mohindroo, the associations’ chairman said.
A similar letter has also been sent to West Bengals Chief Minister Mamata Banerjee. Banerjee has been at the forefront in criticizing the Centre over several issues like CAA-NRC, economic slowdown and was also at the helm of opposing GST rollout. At the time of the change in the tax regime, Banerjee had reasoned that the necessary infrastructure for introducing GST wasn’t in place. Asked about the reason for writing a letter to Banerjee, Mohindroo said, “She has to advise the finance minister. It is up to her to decide if higher tax collection is a priority or the well-being of people”. In the letter, the association said that, based on media reports, it fears that the 12 percent slab will be eliminated and it has led to speculation that the GST on mobile phones will be increased from 12 percent to 18 percent.
According to the letter written to Banerjee, the association claimed that a hike in the GST rate on cellphones will not only impact sales, it will also impact internet penetration in the country as well as the Make in India initiative. “We request you to kindly reconsider any proposals to raise GST for smartphones from the existing 12 percent to 18 percent. It will have a wide-ranging and adverse impact on multiple service offerings and core programs of the government”, the letter sent to Banerjee read.
Mohindroo alleged that under the VAT regime, cellphones were subject to a 4 percent tax and an additional one percent excise duty which went up to 12 percent under the GST regime but the mobile phones industry had accepted the hike owing to “National Interest”. The association also demanded, “Not only the 12 percent rate should be retained, but the inverted duty structure also has to be reversed by charging not more than 12 percent on all components and accessories of mobile phones”. The letter alleged that there are “distortions in the GST rate on components” which ICEA finds illogical.
“Raw materials, inputs, components, etc. in any case should be at the lower GST rate of 5 percent or 12 percent. We have to correct this at its foundation. An inverted GST on components of PCBA of mobile phones should not become alibi to raise the GST rate on the CBU (Completely Built Units) which will have disastrous consequences”, the letter read.