Against the backdrop of Prime Minister Narendra Modi’s pitch for a shake-up of the Goods and Services Tax (GST), India’s cellular and electronics association has pleaded with the government to categorise mobile phones and their components in the lower tax slab of 5 per cent.
On August 15, the Prime Minister had announced in his Independence Day speech a complete overhaul of the eight-year-old GST regime, hinting at reducing the current four-tier tax structure to a two-tier regime with only 5 per cent and 18 per cent tax slabs.
The present GST tax rates comprise nil/zero tax on essential food items, 5 per cent on daily use products, 12 per cent on standard goods, 18 per cent on electronics and services and 28 per cent on luxury and sin goods. Now, besides the two tax slabs of 5 per cent and 18 per cent, there will also be a 40 per cent top bracket for demerit goods.
The India Cellular and Electronics Association (ICEA) urged the government that mobile phones and components be placed in the five per cent GST slab reserved for essential goods, the body said in a statement on Tuesday.
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Terming the current 18 per cent GST put on mobile phones as “regressive”, it argued that mobiles phones are a primary tool of digital access and therefore must be treated as necessities in the forthcoming GST reforms.
"The mobile phone is no longer aspirational; it is essential digital infrastructure for education, healthcare, financial inclusion, and governance," reasoned Pankaj Mohindroo, Chairman, ICEA, adding that it should accordingly be taxed at 5 per cent GST, in line with the GST reform agenda and vision of a USD 500 billion electronics ecosystem.
"India cannot build an inclusive ‘Digital India’ if the very device that enables it remains unaffordable for millions. A 5 per cent GST classification will restore affordability, stimulate demand, and accelerate India's journey towards universal digital access," Mohindroo said.
From ₹18,900 crore in FY15, India’s mobile phone sector saw production grow to ₹5.45 lakh crore in FY25, with 99.5 per cent of the mobile phones sold in India manufactured domestically. Exports have now crossed ₹2 lakh crore, making the country the second-largest mobile phone manufacturer globally.
However, sales in the domestic market have gone down because of the 18 per cent tax put on mobile phones in 2020, says the industry body.
"Since the GST hike to 18 per cent in 2020, annual consumption has fallen from nearly 300 million units to about 220 million units. This has hurt affordability, slowed replacement cycles, and disproportionately impacted volume growth," ICEA said.
From the government’s initial promise to slot mobile phones in the 12 per cent slab, they are now placed in the 18 per cent slab, which ICEA says created distortions that hurt affordability and slowed demand.
"In the pre-GST era, most states consciously capped VAT on mobile phones at 5 per cent, recognising them as essential goods," the statement further added.
Observing that placing mobile phones in the 5 per cent slab is a correction, and not a concession, Mohindroo pointed out that the move will restore the intent of the Fitment Committee and “ensure coherence between GST design and the Prime Minister’s vision for digital inclusion”.
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