Mobile Industry Seeks GST Rate Reduction To 5 per cent Amid Govt Reform Plans

New Delhi, Aug 20 (KNN) India's mobile and electronics manufacturing sector has formally requested the government to reclassify mobile phones and their components under the 5 per cent GST category designated for essential goods.

The India Cellular & Electronics Association (ICEA), the industry's representative body, has characterised the current 18 per cent GST rate on mobile devices as regressive, arguing that these products constitute essential digital infrastructure for over 900 million Indians.

The industry's appeal comes in the context of anticipated GST reforms announced by Prime Minister Narendra Modi during his Independence Day address.

The Prime Minister outlined plans for next-generation GST restructuring focused on rate rationalisation and providing relief for essential items.

The government is reportedly considering a transition from the existing four-tier GST structure of 5 per cent, 12 per cent, 18 per cent, and 28 per cent to a simplified two-tier system comprising 5 per cent and 18 per cent rates.

ICEA Chairman Pankaj Mohindroo emphasised that mobile phones have evolved beyond aspirational products to become fundamental digital infrastructure supporting education, healthcare, financial inclusion, and governance.

He stated that mobile devices should be taxed at 5 per cent GST in alignment with the Prime Minister's reform agenda and vision of establishing a USD 500 billion electronics ecosystem.

The association has documented significant market impact following the GST increase to 18 per cent in 2020. Annual mobile phone consumption in India declined from approximately 300 million units to around 220 million units, affecting affordability and extending replacement cycles while constraining overall market growth.

This decline has occurred despite 99.5 per cent of mobile phones sold in India now being manufactured domestically, with the industry arguing that increased demand would directly stimulate production, enhance value addition, and strengthen India's global competitiveness.

ICEA has referenced the original GST design principles established in 2017, when the Fitment Committee aligned GST rates with pre-existing tax burdens to ensure continuity and prevent economic hardship.

At that time, the combined excise duty and VAT on mobile phones averaged approximately 6 per cent, which corresponded with the proposed 5 per cent GST category.

However, mobile phones were initially placed in the 12 per cent bracket as a transitional arrangement before being elevated to 18 per cent in 2020.

The association noted that most states in the pre-GST era deliberately maintained VAT rates on mobile phones at 5 per cent, recognising these devices as essential goods.

Mohindroo characterised the proposed rate reduction as a correction rather than a concession, stating it would restore the original intent of the Fitment Committee and align GST policy with the Prime Minister's digital inclusion objectives.

(KNN Bureau)