From 18% to 5%? Smartphone makers push for lower GST on devices, parts and accessories

Industry executives said annual smartphone sales have plateaued at about 150 million units for the past four years, and a lower GST would provide relief to millions of consumers.

At present, GST follows a four-tier structure of 5%, 12%, 18% and 28%. The Centre has proposed a rationalised structure of two slabs—5% and 18%—for ‘merit’ and ‘standard’ goods and services, and a 40% rate for a select few items.

The 18% tax slab currently accounts for nearly two-thirds of GST revenues.

The 18% slab is expected to remain the major contributor to GST revenues if the Centre's proposal for a two-tier GST structure and a special 40% rate is implemented, reported PTI, citing a person familiar with the matter.

“The government wants digitalisation in the country, which can’t be achieved without affordable devices. When you make handsets more accessible, more citizens will be able to connect,” Moneycontrol quoted Sunil Raina, managing director of domestic brand Lava, as saying.

Handset makers have argued that the current high tax rate ties up working capital, raises manufacturing costs and erodes India’s competitiveness.

The India Cellular & Electronics Association (ICEA) has written to the finance ministry seeking relief.

ICEA chairman Pankaj Mohindroo said a GST cut would benefit both industry and consumers, adding that the association had earlier proposed a mid-way reduction to 12%, but Prime Minister Narendra Modi’s Independence Day remarks on easing GST burdens for citizens have revived calls for the lowest slab of 5%.

Manufacturers also want parts, components and accessories to be brought under the 5% slab for consistency. While a GST Council committee had initially recommended placing mobile phones in the 5% slab, they were moved to 18% in 2020.

Market tracker IDC has projected a low single-digit decline in smartphone shipments in 2025, citing macroeconomic headwinds that are hurting demand in the budget segment.