Smartphone Makers Want GST Slashed To 5% To Offset 45% Price Hike On Entry-Level Handsets
India's smartphone industry has sought a sharp reduction in the Goods and Services Tax (GST) on mobile phones, with industry body the India Cellular & Electronics Association (ICEA) urging the government to cut the rate from 18% to 5%.
In a letter to Finance Minister Nirmala Sitharaman and Electronics and Information Technology Minister Ashwini Vaishnaw, ICEA has sought that the proposal be placed on the agenda of the next GST Council meeting. The industry body has argued that a lower GST rate could help bring down handset prices, revive weak domestic demand and support the next phase of India's smartphone manufacturing growth.
According to ICEA, weak domestic demand has emerged as a growing concern for the smartphone industry, even as India continues to see growth in mobile-phone exports. The industry body said entry-level handset prices have increased by around 35-45% over the past year, putting additional pressure on consumers, particularly in the affordable smartphone segment.
ICEA also highlighted a sharp increase in memory costs, saying memory prices have surged nearly fourfold as AI data centres absorb a growing share of global supply. The combination of higher component costs and elevated handset prices has made affordable smartphones increasingly difficult to access for consumers.
The impact has been particularly visible in the entry-level segment. ICEA said smartphones priced below Rs 10,000 now account for less than 5% of industry supply. The industry body believes a reduction in GST could provide some relief to consumers by lowering the tax burden on handsets and helping manufacturers address affordability concerns.
ICEA has therefore called for mobile phones to be moved from the existing 18% GST rate to the 5% slab.
ICEA said the proposed GST reduction could have a broader impact on the sector by improving smartphone affordability, reviving consumer demand and increasing smartphone adoption.
The association has also linked the request to India's ambitions of becoming a major global electronics manufacturing and export hub.
While India's mobile-phone exports have expanded significantly in recent years, ICEA has flagged weak domestic consumption as a challenge for the industry's next phase of growth.
The industry body has argued that stronger domestic demand would complement India's export-led manufacturing push and help sustain the expansion of the mobile-phone ecosystem.
The request comes as smartphone makers face a difficult combination of rising component costs and weaker affordability.
The sharp increase in memory prices, in particular, has become a concern as AI data centres compete for memory and other semiconductor components. With higher input costs being reflected in handset prices, the industry is seeking policy support to prevent further erosion in demand.
ICEA's proposal will now be closely watched ahead of the next GST Council agenda, with the industry hoping that a lower tax rate can provide relief to both consumers and manufacturers.
A reduction from 18% to 5%, if approved, would represent a significant change in the tax treatment of mobile phones and could potentially make smartphones more affordable at a time when the sub-Rs 10,000 segment has shrunk to a small share of the market.
