ICEA bats for 5 pc GST for mobile phones; cites USD 500 bn manufacturing vision

New Delhi, Aug 19 (PTI) India Cellular and Electronics Association (ICEA) on Tuesday made a passionate plea for mobile phones and components to be placed in the five per cent GST slab reserved for essential goods, arguing the current 18 per cent cent GST is "regressive".

The comment comes in the backdrop of the overhaul of eight-year old indirect tax regime announced by Prime Minister Narendra Modi during Independence Day speech on Friday. The present GST tax rates of nil/zero on essential food items, 5 per cent on daily use products, 12 per cent on standard goods, 18 per cent on electronics and services and 28 per cent on luxury and sin goods will be replaced by by a two tax slabs of 5 per cent and 18 per cent plus a special 40 per cent top bracket for demerit goods.

In a statement on Tuesday, ICEA urged that mobile phones and components be placed in the five per cent GST slab reserved for essential goods.

The industry body said that the current 18 per cent GST is "regressive" and that mobile phones, a primary tool of digital access, must be treated as necessities in the forthcoming GST reform.

"The mobile phone is no longer aspirational; it is essential digital infrastructure for education, healthcare, financial inclusion, and governance," Pankaj Mohindroo, Chairman, ICEA, said, adding it should accordingly be taxed at five per cent GST, in line with the GST reform agenda and vision of a USD 500 billion electronics ecosystem.

"India cannot build an inclusive Digital India if the very device that enables it remains unaffordable for millions. A 5 per cent GST classification will restore affordability, stimulate demand, and accelerate India's journey towards universal digital access," Mohindroo added.

India's mobile phone sector has seen production grow to Rs 5.45 lakh crore in FY25, from Rs 18,900 crore in FY15 while exports have crossed Rs 2 lakh crore, making India the second-largest mobile phone manufacturer globally.

The domestic market has weakened though, according to ICEA.

"Since the GST hike to 18 per cent in 2020, annual consumption has fallen from nearly 300 million units to about 220 million units. This has hurt affordability, slowed replacement cycles, and disproportionately impacted volume growth," ICEA said.

With 99.5 per cent of mobile phones sold in India now manufactured domestically, stronger domestic demand will directly fuel production, deepen value addition, and strengthen India's global competitiveness, it emphasised.

"However, mobile phones were initially placed in the 12 per cent slab as a transitional compromise. The subsequent increase to 18 per cent in 2020 contradicted this principle and created distortions that hurt affordability and slowed demand. In the pre-GST era, most states consciously capped VAT on mobile phones at 5 per cent, recognising them as essential goods," as per ICEA statement.

Mohindroo asserted that placing mobile phones in the five per cent slab is not a concession, but a correction.

"It restores the intent of the Fitment Committee and ensures coherence between GST design and the prime minister's vision for digital inclusion," he pointed out. PTI MBI HVA