The Government of India has recently passed the much-talked GST (Goods and Service Tax) bill. The bill is meant to introduce a unified Taxation policy across the country, but on the flip side, it will make the products costlier especially the mobile Phones. Syed Tajuddin, CEO of Coolpad India said that smartphone prices in India may shoot up by 7-8% after GST bill comes into effect. However, the passing of GST bill was welcomed by the firms as this would help them in their businesses. Now, the firms have to pay one single tax rather juggling with multiple taxes to operate in different states for free movement and supply of their goods across the country.

The government is still to announce the GST rates, but it is assumed that it would fall between 14 and 16%. According to Tajuddin, GST would act as a catalyst in increasing the online sales of mobile phones that have slow down in last 2-3 months as State Governments imposed additional taxes.  However, the most concerning part for the smartphone manufacturers is that the concessions that state government provided the manufacturers would come to an end.

The smartphone manufacturer Coolpad is expected to launch its three new variants of smartphones in India in the coming months. The devices would target the lucrative budget smartphone market in the country, and the smartphones would be tagged below Rs. 15,000 ($224). Citing the slowing down online sales of smartphones the company has decided to reduce its sales target to 2.5-3 million smartphone units from 4 million earlier. Additionally, the Chinese smartphone behemoth would also focus on offline sales channels in the country.

“We are working on a pilot with for offline sales where they supply to the retailers.” Said Tajuddin

The Chinese competitors like Oppo, LeEco, Coolpad, etc are heating up the budget smartphone competition in India. However, among the Chinese manufacturers, Lenovo dominates the smartphone shipment market in India with over 2 million smartphone units shipped in Q1 2016. A whopping 21% of the smartphone shipped in Q1 2016 in India were from Chinese manufacturers.

How GST is beneficial?

GST would diminish the cascading effect of tax by introducing one single tax that is payable to the Central Government. Rahul Verma, Chairman of Bajaj Group lamented on the efficiency of GST bill; he said that GST would eventually add 2% points to India’s overall GDP growth in coming years.

Although, the GST may be a boon for the manufacturers, the common man is the sufferer as many goods and services are likely to become costlier once this reform is done.

GST would not halt smartphone sales in India

India is the most bankable smartphone market in the world as the country still has just 17% smartphone penetration. Comparatively, Gartner has predicted that smartphone shipments in the country would account 29% growth in 2016 from the previous year. On the other hand, the global smartphone shipments are predicted to grow by just 7% by the end of 2016 as compared to previous year.

The rising LTE penetration in the country would further catalyse the smartphone adoption in India. This will help India to control a sizable share of the global smartphone market as a considerable 13.5% of the total number of smartphones in the world would be in India by 2019.

Smartphone sales have been flat via the online channels lately, but 1 in every 3 smartphones sold in India was from online channels. Moving towards offline channels may be considered as a wise move by Coolpad as tier-2 and tier-3 cities in India are major budget phone friendly markets.A substantial 60% of the total number of mobile phones that were shipped in these cities were smartphones. Due to the lowering price of smartphone people in these cities are preferring smartphones over the mobile phones.