Mobile industry seeks GST rate cut for cell phones up to Rs 1,200

Mobile phone manufacturers` body India Cellular and Electronics Association of India (ICEA) has sought "rationalisation" of goods and services tax (GST) rate to five per cent from existing 12 per cent for entry level mobile handsets costing up to Rs 1,200.

The GST Council meeting during second fortnight of December will review the existing tax structure and compensation cess rates as part of a larger exercise to shore up revenue.

ICEA said the rate cut for entry level mobile handsets will provide direct relief for 50 per cent of Indian consumers in the marginalised and weaker sections` bracket without any significant revenue impact.

Entry level mobile handsets which are also popularly known as "feature phones with push button capability" still occupy approximately 50 per cent of the total domestic market demand in India by volume translated to 120-150 million units in 2018-19, said the industry body which represents mobile handset brands like Lava, Xiaomi, Oppo and Vivo, among others.

But the value share of this category of handsets remains to be approximately Rs 12,000-15,000 crores which is approximately 6.5-8 per cent of the total domestic value size market, according to ICEA.

Seeking the rate cut, the industry body sent a letter to Central Board of Indirect Taxes and Customs, Ministry of Finance, last week.

"We wish to reiterate our earlier recommendation to have a lower GST on entry level handsets `Feature Phones` at five per cent which can effectively serve a larger objective both to broaden the reach of the device with increased penetration as well as promoting growth of the Digital India objective," Pankaj Mohindroo, Chairman, ICEA, said in a statement.

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"We look forward to receiving continual support on this recommendation and get this favourably considered on larger national objective," he added.

ICEA pointed out that prior to coming into force of the GST regime in 2017, mobile handsets were subjected to lower VAT (value added tax) rate of 4-5 per cent in majority of VAT jurisdictions, barring a few states including Gujarat, Maharashtra and Madhya Pradesh.