India, for years, has been an important market for smartphone makers, mainly because of its huge population and very active consumer market. This urged manufacturers to lower their prices to compete with each other. The country also imposes low tax rates, and so manufacturers are able to deliver well-specced smartphones at lower prices.
However, this will change next month. The Goods and Service Tax (GST) Council of India held a meeting today recommending to raise the GST rate from 12 to 18 percent for smartphones. This will result in an increase in overall prices of smartphones in India.
While the country’s budget will benefit from this increase, the consumer market will also suffer in return. Not good news for smartphone makers like Nokia Mobile, Xiaomi, and Realme which are already operating in thin profit margins. The increases in GST will eat up even more of their profit, making business unsustainable. This will force them to compensate by also raising the prices of their offerings.
While it will be early to know how the consumer will react to this change, we already know for sure the current pricing situation of Nokia Mobile in the country. The low to mid-end market is the most active segment in India, and imposing an additional 6 percent in GST will make everything more expensive if the phone makers decide not to absorb the cost. We will see how it’ll go for Nokia Mobile.
The additional GST will be effective starting April first. Unfortunately, it’s not an April Fools prank.