India Government is set to lose huge tax money if Reliance Jio Infocomm’s JioPhone, which will be available for a security deposit of Rs 1,500, is a big success in the Indian telecom market.
The Reliance Industries (RIL) group company will not be paying 12 percent GST on the handset to the Government because the company is not selling JioPhone to consumers. Rather, the customer is getting JioPhone for a refundable security deposit.
For example, there will be an estimated loss of Rs 180 crore to the Government if Reliance Jio sells 10 million JioPhones in the Indian market (12 percent GST on the Rs 1500 phone x 10 million).
RIL Chairman Mukesh Ambani during the 40th annual generating meeting (AGM) of RIL said the company is trying to supply 5 million JioPhones per week.
Jio was not available for comments.
Samsung, the market leader in low-end smartphones, will be under pressure due to the pricing strategy of Reliance Jio. Interestingly, Samsung is one of the key suppliers of LTE network to Reliance Jio.
Jio will be giving refund to users of handsets which are in working condition. Telecom experts are cagey about quality of low cost handsets after three years.
During the three year contract period, the JioPhone customers, who can do MNP (mobile number portability) to port out and opt for any other service provider with the same number, will not be able to use the same phone for other service providers.
JioPhone consumers cannot use SIM cards of other telecom operators in the JioPhone. JioPhone consumers will not be able to access several apps from Google App store as well, effectively impacting the net neutrality concept.