High 18% GST ‘unsustainable’ as cellphones, laptops and internet services are no longer luxuries

Nagendra Kumar Muarya, Puneet Kumar Shrivastav*
Every year, in the second half of January, political decision-makers, the media and researchers are busy deciphering the expectations of an ordinary citizen vis-à-vis the EU budget. This issue looms large, especially now, because the policy response through the general budget will not only affect the fragile livelihoods of the common man, but also pave the way for a faster recovery of the economy.
The outbreak of the Covid-19 pandemic has dramatically changed the way of doing business. Digitization has entered almost every aspect of our lives. Work from home, online classes (not just regular school/college classes, but also tuition/coaching), UPI-based payments (Paytm, GPay, Amazon pay, etc.), shopping online, ticket booking (air, road and rail), online banking and recruitment have also become the new mode of economic activity.
Mobile phones and Internet connectivity have become essential products and services. In addition, the government mandates the linking of the mobile phone number with a number of central government and state sponsored job creation, poverty alleviation and social welfare programs. An individual’s consumption basket cannot exclude these two products.
According to the Indian Telecom Service Performance Indicators (April-June 2021), released by the Telecom Regulatory Authority of India (TRAI), the total number of telecom subscribers (wireless and wireline) has reached 1,202.57 million. Of these, urban telecommunications subscribers amounted to 666.10 million and rural subscribers to 536.47 million. Of this number, wireless subscribers were 1,180.83 million (646.29 million urban and 534.54 million rural). Regarding Internet/Broadband subscribers, the total number of Internet subscribers reached 833.71 million, with a growth of 11.3% compared to the previous year (June 2021 compared to June 2020).
Meanwhile, the government has accepted that the spread of the new Covid variant has reached the community level. This means that for at least the next year things will not be normal and internet and online addiction will likely continue to deepen.
According to the International Data Corporation (IDC) India, in smartphones, the sub-Rs 10,000 segment is expected to account for 54% of overall sales in 2020-21, compared to 51% in 2020. This clearly shows that computer sales laptops, cell phones and other related electronics have defied the impact of Covid-19.
In a country like India, where more than a quarter of the population lives below the poverty line and has no clear signs of increasing consumer disposable income at least in the next fiscal year, it is difficult Understand why cell phones, laptops and Internet services are subject to a high rate of 18% Goods and Services Tax (GST).

This means that consumers have to pay a higher price to buy these electronic items than in the pre-GST era. Rising prices for petroleum products have further shaken consumer disposable income and hopes of reducing the impact of Covid.
In order to continue educating their children in online mode and small traders to run their stores and business, individuals have to bear an additional burden of expenses on electronic devices such as laptops and cell phones, as well as a good internet package.

However, the 18% GST that is levied on recharging/using internet services and purchasing these electronic items places an additional burden on users and makes cell phones, laptops and internet services more expensive . Generally, the 18% GST is imposed on luxury items or goods consumed by the higher income bracket.
In order to provide education through the online mode, where an individual in a household, whether attending primary, secondary or higher education, must have a minimum average of four to five hours of lessons, which requires a huge internet consumption.
Therefore, in a household of five family members, even if two are attending an educational institution, the burden of internet spending can disrupt the overall family budget. This calls for reclassifying cellphones, laptops and internet services as essential goods and services.
Immediate attention is warranted for the reduction of the GST flat rate for mobile phones, laptops and internet/telecom services to give much needed relief to the common man. The Minister of Finance can at least reduce the GST from 18% to 5% on mobile phones below Rs 15,000, laptops below 70,000 and on all kinds of internet packages.

*Nagendra Kumar Maurya is Assistant Professor of Applied Economics at Lucknow University; Puneet Kumar Shrivastav holds a PhD in Economics from BHU and is a Young Professional in the Chandigarh Labor Bureau