The India Cellular and Electronics Association (ICEA) has urged the Finance Ministry to slash GST on mobile phones from 18% to 5%. This follows an 11% drop in domestic shipments and a fourfold increase in memory chip costs, which have driven up entry-level smartphone prices by 45%. The industry warns that these affordability barriers are stalling the shift from 2G to smartphones.
The India Cellular and Electronics Association (ICEA) has formally petitioned the Finance Ministry to reduce the Goods and Services Tax (GST) on mobile phones from 18% to 5%. Industry leaders argue that the current tax structure is unsustainable given the recent slump in domestic demand and rising production costs. The request comes at a time when the sector is struggling to maintain sales volumes in the budget smartphone segment, which serves as a primary entry point for millions of users transitioning from legacy 2G devices.
Domestic market data highlights the urgency behind the request. Mobile phone shipments in India declined by 10% to 11% during the April–June 2026 quarter, marking the sharpest drop for this period in six years. While India has achieved significant success in mobile manufacturing and exports, this export-led growth is currently offset by weak local consumption. Longer replacement cycles and price sensitivity have created a difficult environment for handset makers, particularly in the affordable category.
Rising component costs have exacerbated the problem. Manufacturers have faced a fourfold surge in the cost of memory chips, including DRAM and NAND flash storage, since September 2025. Much of this inflationary pressure is linked to the massive demand for memory capacity from AI data centers, which has squeezed supplies for consumer electronics. As a result, the retail price of entry-level smartphones has climbed by 35% to 45% over the past year. This price jump has led to a shrinking inventory of devices priced below ₹10,000, which now account for less than 5% of the total market supply.
The industry also raised concerns about the growing grey market. By maintaining an 18% GST rate, the association claims the government is indirectly penalizing compliant manufacturers while favoring informal sellers who avoid tax obligations. A reduction to 5% could, according to the proposal, encourage more consumers to choose authorized, tax-paying retail channels, thereby supporting the official manufacturing ecosystem.
The government is currently reviewing the proposal, weighing the potential for higher volume sales against the loss of tax revenue. For investors and industry observers, the core issue remains the narrow margins manufacturers are operating under. With input costs remaining high and domestic demand cooling, companies face significant pressure on their profitability. The ability to stimulate the sub-₹10,000 price segment is crucial for long-term volume growth in the Indian market. The next major update to track will be the Finance Ministry’s stance on tax rationalization and whether further relief for mobile components is granted to ease the burden on local assembly operations.