The Goods and Services Tax (GST) Council may consider a cut in the 18% GST rate on mobile phones as it seeks to revive slowing handset demand and prevent the tax from becoming a drag on India’s electronics manufacturing ambitions, two people aware of the matter said.
The proposal is expected to be discussed at the Council’s meeting likely to be held next month, although the agenda has not been finalized, the people said on condition of anonymity.
The move comes as smartphone shipments in India fell 10-11% year-on-year in the April-June quarter, the steepest decline in a June quarter in six years, according to Counterpoint Research and IDC. Mobile-phone production stood at ₹6.27 trillion in FY26, nearly half of India’s total electronics production of ₹13.11 trillion that fiscal year, according to government data.
“The GST rate on mobile phones may be looked at during the meeting as the government wants to make sure that the tax rate does not slow down the making of mobile phones in India,” said one of the two people cited above.
The Council is also likely to examine whether the benefits of last year’s GST rate rationalization have been passed on to consumers, following complaints of companies restoring prices to pre-reform levels, along with measures to bring prices of affected goods back to earlier lower levels.
The proposed review assumes significance as the government recently notified the ₹62,500-crore Mobile Phone Manufacturing Scheme on 21 August. The scheme will run for five years, from FY27 to FY31. It is aimed at scaling up mobile phone production, increasing domestic value addition, and strengthening the local manufacturing ecosystem.
“Though the GST reforms have brought significant relief to consumers, with prices of most items declining substantially, it has come to the Council’s notice that prices of some consumer durables and medicines have increased,” the second person said, adding that the Council will review the reasons behind the increase in prices.
“The Council will work towards addressing any such lapses and ensure that the benefits of GST rate reductions are fully and effectively passed on to consumers,” this person added.
The GST Council is a constitutional body comprising the Union finance minister, the Union minister of state for finance, and the minister in charge of finance, or any other minister nominated by each state government.
Queries emailed to the spokespersons of the finance ministry and GST Council Secretariat remained unanswered till press time.
Before the GST 2.0 reforms last year, the previous four-slab structure was replaced with a simplified framework of 5%, 18% and a special 40% demerit rate.
A March 2026 study by National Institute of Public Finance and Policy (NIPFP) professor Sacchidananda Mukherjee and research fellow Shivani Badola found mixed evidence on the transmission of GST cuts to consumers.
The study noted that the average CPI (consumer price index) for medicines increased from 103.86 in May-August 2025 to 104.26 in October 2025-January 2026, despite many medicines moving into the exempt or 5% GST categories.
The CPI for shampoo and related hair products rose from 103.30 to 104.40, while toothpaste, mouthwash and toothbrushes increased from 103.19 to 103.92 during the same periods.
The trend was more pronounced for some personal-care products. The CPI for hair oil and hair colour rose 2.77% from 104.73 to 107.64, while that for body powder, cream, body lotion and moisturizers increased 1.14% from 104.55 to 105.73.
However, the study also found evidence of price transmission in some categories. Air-conditioner prices fell 6.4% and motor car and jeep prices fell 7.52% between the two periods, while motorcycle and scooter prices declined 5.19%.
Experts say the GST cut benefits must be passed on to consumers.
“The GST cuts were expected to have a sobering impact on consumer prices. We experienced a big disruption by way of trade tensions and then the Middle East conflict, leading to a significant increase in input costs for the industry. The GST related rationalization as well as manufacturers passing on the higher cost of production partially has helped the inflation to remain within the targeted band of MPC,” an tax expert said.
“Given that there have been significant changes made in the rates only about 10 months back, the GST Council would likely wait and let the market stabilise and get more data points before any further rate-related interventions towards propping demand,” he said.
“The benefit of the GST rate cut must be passed on to consumers, as that was the intent of the GST Council’s decision,” said former vice chairman of NITI Aayog and chairman of Pahle India Foundation, a non-profit policy think tank.
“Companies also have an interest in ensuring that the reduction reaches buyers, particularly at a time when demand remains subdued. Lower prices can support affordability, encourage purchases and help revive demand,” he added.
Source from: https://www.livemint.com/news/gst-council-may-cut-18-tax-on-mobile-phones-as-handset-demand-slows-11787831366453.html
