ICEA urges reclassification of mobile phones under 5% GST slab as essential goods

The India Cellular & Electronics Association (ICEA), representing the country’s leading mobile and electronics manufacturers, has called for mobile phones and their components to be placed under the 5% GST slab designated for essential goods. The association argues that the current 18% GST rate is regressive and fails to reflect the status of mobile phones as necessities for over 900 million Indians.

“Mobile phones are no longer aspirational items, they are essential digital infrastructure, underpinning education, healthcare, financial inclusion, and governance. They must rightly be taxed at 5% GST, aligning with the Hon’ble Prime Minister’s GST reform agenda and his vision of building a USD 500 billion electronics ecosystem,” said Pankaj Mohindroo, Chairman of ICEA.

In his Independence Day address, Prime Minister Narendra Modi announced upcoming GST reforms focused on rate rationalisation and relief on essential everyday items. ICEA has urged that mobile phones, being indispensable tools for daily life and digital inclusion, be treated accordingly in this reform exercise.

“India cannot build an inclusive Digital India if the very device that enables it remains out of reach for millions. A 5% GST classification will restore affordability, stimulate demand, and accelerate the country’s progress towards universal digital access,” Mohindroo added.

Mobile manufacturing – A make in India success story

India’s mobile phone sector stands as one of the flagship achievements of the Make in India initiative. Domestic production has surged from Rs18,900 crore in FY2014–15 to Rs 5,45,000 crore in FY2024–25. Meanwhile, exports have surpassed Rs 2,00,000 crore, making India the world’s second-largest mobile phone manufacturer.

However, domestic consumption has faltered. Since the GST rate was increased to 18% in 2020, annual mobile phone sales have declined from nearly 300 million units to approximately 220 million. This has affected affordability, slowed device replacement cycles, and hindered volume growth, particularly among price-sensitive consumers.

With 99.5% of mobile phones sold in India now manufactured domestically, boosting domestic demand would directly enhance production, deepen value addition, and further strengthen India’s global competitiveness.

Revisiting GST principles

When the GST system was introduced in 2017, the Fitment Committee was guided by the principle that the new tax incidence should mirror pre-GST burdens, to ensure continuity and minimise disruption. For mobile phones, the combined excise duty and VAT averaged around 6%, naturally aligning them with the 5% GST slab.

Initially, mobile phones were placed in the 12% slab as a transitional measure. However, the subsequent increase to 18% in 2020 contradicted the original principle and introduced distortions that made phones less affordable and suppressed demand. Notably, most states had capped VAT on mobile phones at 5% in the pre-GST era, acknowledging their essential nature.

“Placing mobile phones in the 5% slab is not a concession, it is a correction. It honours the original intent of the Fitment Committee and ensures alignment between GST design and the Prime Minister’s vision for digital inclusion,” Mr Mohindroo emphasised.

ICEA’s position

In accordance with ICEA, correcting the GST structure for mobile phones will yield a double benefit: easing the financial burden on consumers and supporting India’s manufacturing ecosystem. Affordable smartphones will expand digital access for students, households, and rural populations. Simultaneously, stronger domestic demand will anchor production growth and help scale towards Prime Minister’s reform agenda, the USD 500 billion electronics vision, and the overarching goal of universal access under Digital India.