GST Cut Urged
Indian Handset Makers Seek GST Reduction to Boost Affordable Smartphone Adoption
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Key Points
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ICEA said an estimated 250 million Indians still use feature phones, and argued that cheaper smartphones are important because they serve as gateways to digital payments, government services, education, healthcare, employment, banking and communications.
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India’s mobile-phone production rose from ₹18,900 crore in FY15 to ₹6.27 lakh crore in FY26, while exports increased from ₹1,566 crore to ₹2.60 lakh crore; ICEA said mobile phones became the country’s largest export product in FY26.
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ICEA warned that India’s manufacturing gains could be constrained by a weakening domestic market, saying that longer replacement cycles and softer handset consumption have created an imbalance that must be addressed to sustain the next phase of growth.
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The association said that, at the current 18% GST rate, every ₹1 increase in a handset’s pre-tax cost adds another 18 paise in tax, increasing the impact of higher component prices on consumers.
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Market research estimates cited by The Economic Times suggest India’s smartphone shipments could fall by 8% to 15% in calendar 2026, to roughly 136 million to 138 million units.
India's smartphone industry is pushing the government to slash GST on mobile phones from 18% to 5%, citing a sharp rise in component costs and falling affordability. ICEA says entry-level handset prices have jumped 35% to 45% over the past year as memory chip costs nearly quadrupled, driven partly by demand from AI data centers. The cut would be presented at the next GST Council meeting.
Smartphones under ₹10,000 now make up less than 5% of the market, while longer replacement cycles and weaker domestic demand are pressuring growth—even as India's phone manufacturing and exports hit record highs. The Economic Times estimates smartphone shipments could fall 8% to 15% in 2026, to roughly 136 million to 138 million units.
Why Handset Prices Have Soared So Fast
Memory chip prices—DRAM and NAND—nearly quadrupled over the past year. ICEA pins much of this surge to competition from AI data centers, which are gobbling up chip supply and driving costs higher. For every ₹1 increase in a phone's pre-tax cost, the 18% GST adds another 18 paise, compounding the pain on consumers.
The result: budget phones have become expensive. Handsets below ₹10,000 once drove India's smartphone growth, especially among rural and lower-income buyers. Now they're vanishing from shelves.
India's Record Phone Manufacturing Boom Faces Demand Headwind
India's mobile phone production has exploded. Output grew from ₹18,900 crore in FY15 to ₹6.27 lakh crore by FY26, while exports surged from ₹1,566 crore to ₹2.60 lakh crore. ICEA says phones became India's largest export product in FY26. But the domestic market is cooling fast.
Consumers are holding onto old phones longer. Replacement cycles have stretched, and weaker handset consumption is creating an imbalance. ICEA warns that without action, India's manufacturing gains could stall.
How a Tax Cut Could Unlock Digital Access for Millions
ICEA argues that cheaper phones are gateways to digital inclusion. An estimated 250 million Indians still use feature phones and 2G devices. Lower handset prices would help them switch, unlocking access to digital payments, government services, education, healthcare, and job opportunities.
The industry also wants GST cuts on mobile-phone components—chargers, screens, batteries—to lower assembly costs. ICEA says this would ease affordability pressures and support India's next phase of smartphone manufacturing, though the government has not yet announced a decision.
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