New Delhi: India's mobile phone industry has reached out to Prime Minister Narendra Modi to reduce the goods and services tax ( GST) on handsets to 5%, saying they have already paid an additional ₹81,800 crore from 2020-21 to 2024-25 due to an increase in the levy in 2020 to 18%.
In a letter dated August 25, exclusively seen by ET, the industry said smartphone sales in India have stagnated at around 150 million per year since 2021 and they are also exploring various methods to enhance affordability and accessibility of handsets.
"Mobile phones, being the most empowering devices, were expected to see domestic sales grow to levels comparable to China. China peaked at 400 million plus smartphones per annum. However, the domestic sales of mobile phones have declined from 300 million in 2020 to 220 million in 2024," industry body India Cellular and Electronics Association (ICEA) said in the letter.
Mobile phones include both feature phones as well as smartphones.
Mobile phones used to draw 6% taxes before the implementation of the GST mechanism in 2017, but the devices were put in 12% slab as an interim measure and further increased to 18% slab rate in 2020, due to an inverted duty structure. The additional proceeds due to the higher GST rates contributed much more than the around ₹40,000-crore corpus set aside for sops under the smartphone production-linked incentive (PLI) scheme.
The original design principle of GST aimed to align its tax incidence with the pre-GST tax on each product. However, the Fitment Committee in 2017 placed mobile phones in the 12% slab as a transitional measure, which was higher than the pre-GST incidence. The correct alignment, as per the previous taxation policy, should have been 5%.
"The industry was further shocked when GST was increased to 18% in 2020, justified as a countermeasure to the 'inverted duty structure'. While the industry and trade were shocked, the extra revenue generated because of 6% additional GST has been estimated at around ₹81,800 crore from 2020-21 to 2024-25, which has in a way funded the PLI scheme many times over," Pankaj Mohindroo, chairman of ICEA, said in the letter.
The association highlighted that India has become the world's second-largest mobile phone manufacturer, with production rising from ₹18,900 crore in FY15 to ₹5,45,000 crore in FY25, and exports surpassing ₹2,00,000 crore.
While the industry remains fully committed to achieving the vision of $500 billion in electronics production in the coming years, with mobile phones as the anchor sector, the extraordinary growth in export is today at grave risk because of the current geopolitical situation.
In a letter dated August 25, exclusively seen by ET, the industry said smartphone sales in India have stagnated at around 150 million per year since 2021 and they are also exploring various methods to enhance affordability and accessibility of handsets.
"Mobile phones, being the most empowering devices, were expected to see domestic sales grow to levels comparable to China. China peaked at 400 million plus smartphones per annum. However, the domestic sales of mobile phones have declined from 300 million in 2020 to 220 million in 2024," industry body India Cellular and Electronics Association (ICEA) said in the letter.
Mobile phones include both feature phones as well as smartphones.
Mobile phones used to draw 6% taxes before the implementation of the GST mechanism in 2017, but the devices were put in 12% slab as an interim measure and further increased to 18% slab rate in 2020, due to an inverted duty structure. The additional proceeds due to the higher GST rates contributed much more than the around ₹40,000-crore corpus set aside for sops under the smartphone production-linked incentive (PLI) scheme.
The original design principle of GST aimed to align its tax incidence with the pre-GST tax on each product. However, the Fitment Committee in 2017 placed mobile phones in the 12% slab as a transitional measure, which was higher than the pre-GST incidence. The correct alignment, as per the previous taxation policy, should have been 5%.
"The industry was further shocked when GST was increased to 18% in 2020, justified as a countermeasure to the 'inverted duty structure'. While the industry and trade were shocked, the extra revenue generated because of 6% additional GST has been estimated at around ₹81,800 crore from 2020-21 to 2024-25, which has in a way funded the PLI scheme many times over," Pankaj Mohindroo, chairman of ICEA, said in the letter.
The association highlighted that India has become the world's second-largest mobile phone manufacturer, with production rising from ₹18,900 crore in FY15 to ₹5,45,000 crore in FY25, and exports surpassing ₹2,00,000 crore.
While the industry remains fully committed to achieving the vision of $500 billion in electronics production in the coming years, with mobile phones as the anchor sector, the extraordinary growth in export is today at grave risk because of the current geopolitical situation.
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