ICEA has urged the GST Council to cut mobile phone GST from 18% to 5% to improve smartphone affordability and accelerate upgrades.
The India Cellular and Electronics Association (ICEA) has urged the government to reduce the Goods and Services Tax (GST) on mobile phones from 18% to 5%, arguing that lower handset taxation could improve affordability and accelerate India’s transition from feature phones to smartphones.
The industry association has asked the Ministry of Finance and the GST Council to consider a 5% merit GST rate for mobile phones and corresponding rationalisation of GST on mobile-phone components. ICEA represents major smartphone brands and manufacturers operating in India.
The proposal comes as smartphone manufacturers face rising component costs, particularly for memory chips, while demand in the affordable handset segment remains under pressure. ICEA believes that a lower GST rate could reduce the upfront cost of smartphones and help revive domestic consumption.
ICEA Wants Mobile Phone GST Cut From 18% to 5%
Mobile phones currently attract 18% GST in India. ICEA is seeking a reduction to 5%, arguing that smartphones have become essential tools for accessing digital payments, banking, government services, education, healthcare, employment and online communication.
According to the association, around 250 million Indians continue to use feature phones. ICEA sees this large user base as an opportunity for smartphone manufacturers, particularly if the cost barrier for entry-level devices can be reduced.
ICEA has also pointed to the original tax treatment of mobile phones before GST. It said mobile phones previously attracted around 1% excise duty along with VAT of 5% or less in most states, although the actual structure varied across states.
When GST was introduced in 2017, mobile phones were placed in the 12% slab. The rate was subsequently increased to 18% in April 2020. ICEA is now seeking a 5% rate, arguing that mobile phones should receive treatment closer to essential or merit-rate products.
Rising Memory Costs Are Adding Pressure on Smartphone Prices
The GST proposal comes at a difficult time for handset manufacturers and consumers.
ICEA has highlighted a sharp increase in the cost of mobile DRAM and NAND flash memory. According to the association, prices for these components have increased roughly fourfold since September 2025, partly because AI data centres are absorbing a growing share of global memory capacity.
ICEA also said smartphone prices in India have increased by around 35% to 45% across brands over the past year. The impact is particularly significant in the entry-level segment, where consumers are more sensitive to even relatively small increases in handset prices.
The association said the availability of smartphones priced below Rs 10,000 has also contracted significantly, with supply falling to less than 5% of the market according to its assessment.
For manufacturers, absorbing the entire increase in component costs is difficult. ICEA argues that the existing 18% GST rate adds another layer to the final price paid by consumers.
250 Million Feature-Phone Users Remain a Major Upgrade Opportunity
ICEA’s proposal is also closely linked to India’s digital inclusion goals.
The association estimates that around 250 million Indians continue to use feature phones. Many of these users remain potential smartphone buyers, but handset affordability can influence when they decide to upgrade.
ICEA argues that reducing GST would make smartphones more accessible to first-time buyers, rural consumers and lower-income households. It could also encourage users still dependent on 2G and feature phones to move towards 4G and 5G smartphones.
This transition is significant because a smartphone is increasingly becoming the primary gateway to India’s digital economy. Digital payments, online banking, government services, education and a growing range of employment and commerce services are now heavily dependent on smartphone and mobile internet access.
A lower handset tax would not automatically guarantee that consumers upgrade, but ICEA believes reducing the initial purchase cost could remove one of the barriers holding back replacement and first-time purchases.
ICEA Links GST Cut to India’s Manufacturing Growth
The association is also making a broader manufacturing argument for reducing mobile phone GST.
India’s mobile-phone manufacturing industry has expanded rapidly over the past decade. ICEA said domestic mobile-phone production increased from Rs 18,900 crore in FY2014-15 to Rs 6.27 lakh crore in FY2025-26.
Mobile-phone exports also increased from Rs 1,566 crore to Rs 2.60 lakh crore over the same period. ICEA said India has become the world’s second-largest mobile-phone manufacturer by volume, while mobile phones emerged as the country’s largest export product in FY2025-26.
However, the association believes manufacturing and exports alone are not enough to sustain the next stage of industry expansion.
A stronger domestic market could provide manufacturers and component suppliers with higher production volumes, better capacity utilisation and greater visibility for future investments. ICEA therefore sees GST rationalisation as a potential demand-side measure alongside India’s manufacturing incentives.
Why ICEA Wants the GST Council to Act
ICEA had also raised the issue during the previous GST restructuring exercise. The association now argues that the case for a lower mobile-phone tax has become stronger because handset prices have risen while replacement cycles have lengthened.
The proposed reduction would represent a significant change. Moving from 18% to 5% would reduce the GST component substantially, although the final retail price reduction would depend on how much of the tax benefit is passed through the supply chain.
For example, on a handset with a pre-tax value of Rs 20,000, an 18% GST rate represents Rs 3,600 in GST. At 5%, the GST would be Rs 1,000, creating a theoretical difference of Rs 2,600 before considering pricing, margins and other commercial factors.
That does not mean every Rs 20,000 smartphone would automatically become Rs 2,600 cheaper. The actual consumer benefit would depend on how manufacturers, distributors and retailers pass on the reduction.
GST Cut Could Help Entry-Level 4G and 5G Smartphones
The most immediate impact of the proposal would likely be felt in the affordable smartphone segment.
The combination of higher memory prices, longer replacement cycles and limited availability of very low-cost smartphones has made it more difficult for consumers at the bottom end of the market to upgrade.
ICEA believes a 5% GST rate could improve the economics of entry-level smartphones and support the migration of feature-phone users to 4G and 5G devices.
However, GST is only one component of handset pricing. Memory, display panels, processors, batteries, cameras, logistics, distribution margins and brand positioning also influence the final retail price.
The government’s decision, therefore, will determine whether tax rationalisation becomes part of a broader strategy to stimulate smartphone demand.
Government Decision Will Be the Next Key Step
ICEA’s proposal is a recommendation from the industry and does not mean that the GST rate has already been reduced.
The GST Council will have to consider the proposal before any change can be implemented. For consumers, the key question is whether the government sees mobile phones as a sufficiently important digital-access product to justify moving them into the 5% merit-rate category.
For India’s smartphone industry, the timing is significant. Manufacturing and exports have grown strongly, but ICEA is warning that domestic demand needs renewed momentum to support the next phase of the ecosystem.
A reduction in mobile-phone GST from 18% to 5% would therefore have implications beyond handset prices. It could influence smartphone adoption, feature-phone replacement, domestic consumption and the broader growth of India’s electronics manufacturing ecosystem.
