New Delhi, July 2: A whitepaper jointly prepared by Grant Thornton Bharat and Policy Watch India Foundation has called for a re-examination of the Goods and Services Tax framework for affordable smartphones, arguing that the current uniform 18 per cent GST no longer reflects the evolving role of smartphones in India’s digital economy.
The report recommends reducing GST to 5 per cent on smartphones priced below INR 25,000, while retaining the existing 18 per cent GST on higher-priced devices. According to the study, such a differentiated tax structure would improve affordability for first-time buyers and price-sensitive consumers while supporting the Government’s objectives of Digital India, financial inclusion and electronics manufacturing.
The whitepaper argues that the GST increase from 12 per cent to 18 per cent in April 2020 was intended to correct the inverted duty structure in mobile phone manufacturing. However, it notes that the policy landscape has changed substantially over the past six years. Smartphones have since become the primary gateway to Digital Public Infrastructure , enabling access to UPI, Aadhaar-enabled authentication, Direct Benefit Transfers , DigiLocker, UMANG and a wide range of citizen services.
According to the report, applying the same GST rate to an entry-level smartphone and a premium device disproportionately affects the segment that drives digital inclusion. The sub-₹25,000 smartphone segment, which accounts for nearly two-thirds of India’s handset shipments, caters primarily to first-time buyers, rural households, women, students and lower-income consumers.
The study notes that affordability pressures have intensified due to rising global memory prices, higher component costs, rupee depreciation and the prevailing GST structure. As a result, replacement cycles in the affordable segment have lengthened even as premium smartphone sales continue to grow. The report estimates that nearly 35 crore Indians continue to use feature phones, indicating that affordability remains a significant barrier to wider digital participation.
Revisiting the GST framework, the report argues that smartphones should now be viewed as first-access digital infrastructure rather than discretionary consumer products. As India’s governance, financial services, healthcare, education and commerce become increasingly digital-first, access to an affordable smartphone has become central to effective participation in the economy.
The whitepaper also challenges the conventional assumption that lowering GST would necessarily reduce government revenues. It distinguishes between short-term static revenue implications and long-term dynamic gains, arguing that improved affordability could stimulate higher smartphone adoption, increase telecom usage, deepen digital payments, expand e-commerce participation and generate additional tax revenues across multiple sectors. According to the report’s projections, the revenue trajectory under a lower GST regime could surpass the status quo through volume-led growth and a broader formal digital economy.
The report further links handset affordability with India’s manufacturing ambitions under the Production Linked Incentive scheme. While India has emerged as the world’s second-largest smartphone manufacturer, sustaining manufacturing scale, improving domestic value addition and strengthening component localisation will require robust demand from the mass-market smartphone segment.
International benchmarking included in the whitepaper shows that India levies one of the highest indirect tax rates on smartphones among comparable electronics manufacturing economies. Countries such as Vietnam, Thailand, Indonesia and Malaysia have adopted relatively lower tax structures that support wider smartphone adoption while maintaining manufacturing competitiveness.
The report concludes that a differentiated GST framework for affordable smartphones should be viewed not as a tax concession to the electronics industry but as a strategic policy intervention that aligns taxation with India’s digital transformation, manufacturing ambitions and long-term economic objectives.