Smartphone brands and manufacturers, through industry body India Cellular and Electronics Association (ICEA), have stepped up calls for a sharp cut in the Goods and Services Tax (GST) on handsets, seeking that the rate be reduced from 18% to 5% to revive domestic demand and improve smartphone affordability.
In two representations dated September 2 and September 3, ICEA urged Finance Minister Nirmala Sitharaman and Electronics and IT Minister Ashwini Vaishnaw to take up the proposal at the next meeting of the GST Council. ICEA, which represents leading domestic and global players like Apple, Xiaomi, Oppo, Vivo, Dixon, Bhagwati and Lava among others, said the current 18% GST is adding to affordability pressures, particularly in the entry-level smartphone segment.
The industry body has also sought corresponding GST rate rationalisation for mobile-phone components. It argued that a lower handset tax rate is needed at a time when domestic consumption has weakened, replacement cycles have lengthened and the affordable smartphone segment remains under pressure, even as India’s manufacturing and exports have expanded rapidly.
The push for a GST cut comes as smartphone prices have risen sharply. ICEA said mobile DRAM and NAND flash prices have increased roughly fourfold since September 2025, driven in part by demand from AI data centres absorbing global memory capacity. As a result, entry-level smartphone prices in India have increased by around 35-45% across brands over the past year, according to the association.
The supply of smartphones priced below Rs 10,000 has also contracted sharply, with ICEA putting it at less than 5%. The association said manufacturers can absorb only part of the increase in memory costs, leaving consumers to bear the rest. At an 18% GST rate, every Rs 1 of additional pre-tax handset cost results in another 18 paise in GST, it said.
ICEA said the pressure is particularly significant for first-time smartphone buyers, rural consumers and lower-income households. A reduction to 5% GST, it argued, would lower the upfront cost of devices, encourage replacement purchases and accelerate the shift of feature-phone and 2G users to smartphones.
ICEA is also making the case on the basis of the original GST fitment methodology. Before GST, mobile phones attracted 1% basic excise duty, while most states applied VAT of 5% or below, although rates varied significantly across states. ICEA’s earlier representations estimated the effective composite tax incidence at about 6%, while its current submission cites a weighted-average pre-GST incidence of approximately 7%.
Mobile phones were initially placed in the 12% GST slab when GST was introduced in July 2017, before the rate was increased to 18% in April 2020. ICEA now wants the rate brought down to 5%, which it says would be consistent with the original fitment approach.
The association had also made a similar pitch during last year’s GST restructuring exercise, but said the subsequent increase in handset costs and continued weakness in domestic demand have strengthened the case for reconsideration.
The demand argument comes against the backdrop of India’s rapid expansion as a mobile-phone manufacturing hub. ICEA said domestic mobile-phone production rose from Rs 18,900 crore in FY2014-15 to Rs 6.27 lakh crore in FY2025-26, while exports increased from Rs 1,566 crore to Rs 2.60 lakh crore. India is now the world’s second-largest mobile-phone manufacturer by volume, and mobile phones became the country’s largest export product in FY2025-26, it said.
However, the association said manufacturing and export growth has not been matched by domestic consumption. It wants a larger home market to provide manufacturers and suppliers with more predictable production volumes and support investment in component manufacturing, product development, distribution and after-sales services.
ICEA also argued that a GST cut need not necessarily translate into a proportionate loss of government revenue. Higher handset sales, greater formalisation of grey-market purchases and recurring GST collections from mobile data, subscriptions and digital services could offset part of the initial reduction, it said.
In its representation to Vaishnaw, ICEA specifically asked the minister to support the proposal with the Finance Minister and recommend that it be placed before the upcoming GST Council meeting.
