Synopsis

A new whitepaper suggests a significant GST reduction on smartphones under Rs 25,000 to 5%, while retaining 18% for pricier models. This move aims to boost affordability for first-time and price-sensitive buyers, crucial for Digital India and financial inclusion.

New Delhi, GST on smartphones priced below Rs 25,000 should be cut to 5 per cent, while 18 per cent rate could be retained on higher-priced devices, according to GT Bharat-PWIF paper released on Wednesday.

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 (GST) 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.

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.

It highlighted that applying the same GST rate to an entry-level smartphone and a premium device disproportionately affects the segment that drives digital inclusion.

The sub-Rs 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 GT Bharat-PWIF study said, adding that nearly 35 crore Indians continue to use feature phones, indicating that affordability remains a significant barrier to wider digital participation.

Arguing that smartphones should now be viewed as first-access digital infrastructure rather than discretionary consumer products, the paper said 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.

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, it added. PTI