Affordable smartphones could power Digital India, but the industry warns that the high 18% GST is stifling demand, urging the government to slash rates to 5% for growth.
The Indian mobile phone sector has urged the government to reduce the Goods and Services Tax (GST) on handsets from the current 18% to 5%, arguing that high taxation has hurt affordability and slowed sales. The appeal comes as the Centre prepares a major revamp of GST slabs.
Industry body India Cellular and Electronics Association (ICEA) stressed that mobile phones are no longer aspirational products but essential tools for digital inclusion.
The sector has seen a sharp decline in sales since the duty hike. In 2017, phones attracted 12% GST, but the rate was raised to 18% in 2020. Following this, annual consumption dropped from nearly 300 million units to around 220 million units, according to ICEA data. The increase has slowed replacement cycles, restricted volume growth, and disproportionately affected low-income consumers.
ICEA emphasised that, prior to GST, the combined incidence of excise and VAT on handsets averaged around 8%, making phones accessible to most households. A return to a 5% rate, it argued, would restore affordability, stimulate demand, and accelerate universal digital adoption.
The industry also pointed out that 99.5% of handsets sold in India are now manufactured domestically, a major success of the Make-in-India programme. Stronger local demand, therefore, would directly boost production, deepen value addition, and enhance India’s global competitiveness.
Prime Minister Narendra Modi has announced the next phase of GST reforms, aimed at rationalising rates and providing relief on everyday essentials. The mobile sector has asked that handsets be reclassified as essential goods in this exercise, rather than being treated as aspirational items.
