High 18% GST 'untenable' as mobiles, laptops, internet services are no more luxury

Nagendra Kumar Muarya, Puneet Kumar Shrivastav*
Every year in the second half of January month, policy makers, media and researchers are found to be busy in deciphering what a common man’s expectations are from the Union budget. This question takes an important place especially now, as the policy response through general budget will not only the affect common man’s Covid-affected fragile livelihood but also pave way for faster recovery for the economy.
The Onset of Covid-19 pandemic has changed the way of business significantly. Digitisation has entered in almost every aspect of our lives. Work from home, online class (not only school/college regular classes but tuition/coaching as well), UPI based payments (Paytm, GPay, Amazon pay, etc.), online shopping, booking of tickets (air, road and rail), online banking and recruitment as well became the new mode of economic activity.
Mobile phones and internet connectivity have become essential commodities and services. Also, the government is making mandatory the linking of mobile number with a number of Centrally and State sponsored employment generation, poverty reduction and social welfare schemes. An individual’s consumption basket cannot exclude these two commodities.
As per the Indian Telecom Services Performance Indicators (April-June, 2021), published by the Telecom Regulatory Authority of India (TRAI), total telecom subscribers (wireless plus wireline) have reached 1,202.57 million. Of these, urban telecom subscribers stood at 666.10 million and rural subscribers were 536.47 million. Of this, wireless subscribers were 1,180.83 million (urban 646.29 million and rural 534.54 million). As for internet/broadband subscribers, total internet subscribers reached 833.71 million, with a growth of 11.3% from the previous year (June 2021 vs June 2020).
Meanwhile, the government has accepted that the spread of the new Covid variant has reached the community level. It means that for at least the coming year things will not be normal and dependence on internet and online will remain probably deepen further.
As per the International Data Corporation (IDC) India, in smartphones, the sub-Rs 10,000 segment is projected to account for 54% of overall sales during 2020-21, up from 51% in 2020. This clearly shows that sales of laptops, mobiles phones and other related electronic devices have defied Covid-19 impact.
In a country like India, where the more than quarter of the population lives below the poverty line having no clear sign of increase in consumer disposable income in at least next financial year, it is difficult to understand as to why mobile phones, laptops and internet services attract a high rate of 18% goods and services tax (GST).

It means, the consumers have to a pay higher price to buy these electronic items than the pre-GST era. Rise in petroleum products prices has further dented the consumer’s disposable income and the hope to reduce the impact of Covid.
In order to continue education of their children in online mode, and small shopkeepers to run their shops and business, individuals have to bear an extra burden of expenditure on electronic devices like laptops and mobile phones along with good internet package.

However, 18% GST which is being levied on recharging/ availing the internet services and purchase of these electronic items generate an extra burden on the users and makes the mobiles, laptops and internet services dearer. Generally, 18% GST is being imposed upon luxury items or goods consumed by the higher income category.
In order to impart education through online mode, where an individual in a household, whether attending primary, secondary or tertiary education, has to avail minimum average of four to five hours of classes that requires huge internet consumption.
Therefore, in a household of five family members, even if two attend educational institution, the burden of internet expenses may disrupt the overall budget of the family. This calls for reclassification of mobile phones, laptops and internet services as essential goods and services.
An immediate attention is warranted for reduction in the slab rate of GST for mobile phones, laptops and internet / telecom services to give a much requisite relief to the common man. The finance minister can at least reduce GST 18% to 5% on mobile phones below Rs 15,000, laptops below 70,000, and on all kinds of internet packages.
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*Nagendra Kumar Maurya is Assistant Professor of Applied Economics in Lucknow University; Puneet Kumar Shrivastav is PhD in Economics from BHU and is Young Professional at Labour Bureau Chandigarh

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