GST filing deferment no relief for handset industry after recent rate hike

NEW DELHI: The deferred filing of Goods and Services Tax returns won’t provide much of a breather for mobile phone manufacturers, which face a 6 percentage point rate increase on handsets from April 1 and a further drag on demand, already plunging amid the Covid-19 outbreak.

“Though returns can be filed till June 30, any phone sold after April 1 (including inventory) will be billed at 18% GST (from 12% currently),” said Abhishek Rastogi, a partner at law firm Khaitan & Co.

What the sector needed was an allowance to pay this tax in a deferred way over the next six months, otherwise it is hardly any relief, Rastogi said.

According to market research firm International Data Corporation, even after the 21-day nationwide lockdown ends in mid-April, it will take at least two quarters for demand to revive. Realme and Samsung have already said the increase in GST will be passed on to consumers.

An intelligence firm that tracks the smartphone market has cut this year’s growth estimate to 5.5% from 8% earlier. Realme has estimated that phone prices could go up by 12-15% for reasons including fluctuation in rupee-dollar exchange rates, impact of Covid-19 on the supply chain for components, an increase in memory prices of smartphones, and higher GST.

“At Realme, we are trying to absorb the first three impacts. However, it will not be feasible for us to absorb GST increase impact,” it had said.

The GST Council increased the rate on mobile phones to 18% from 12% on March 14 to correct an inverted duty structure that taxed components at a higher rate than the device.

“While Samsung and Realme have written to us about their decision to pass on the new rates, others have communicated verbally,” Arvinder Khurrana, president of the All India Mobile Retailers Association, told ET. Xiaomi and Vivo said they are yet to take a call on this.

ET had reported that the decision could lead to job losses and nullify efforts to make India a smartphone manufacturing hub.

In the wake of the Covid-19 crisis, finance minister Nirmala Sitharaman said on Tuesday that traders with an annual turnover of less than Rs 5 crore can file GST returns for March, April and May by June 30 without late fees or penalties.

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