• Notification Date: 15-06-2023
• Notification No: N/A

Mobile GST Hike gives Government more than PLI Outlay

The incremental GST of 6% on mobile phones has raked in Rs 42,897 crore over the last three financial years, topping the nearly Rs 39,000-crore outlay of the production-linked incentive (PLI) scheme for manufacturing of smartphones and making the government scheme self-sustaining, according to industry executives. 

In fact, the five-year smartphone PLI scheme will leave a revenue surplus of Rs 11,000 crore if only the Centre's GST (goods and services tax) collections are taken into consideration, industry body India Cellular and Electronics Association (ICEA) pointed out in a June 5 letter to the finance ministry. 

The government had increased the GST on mobile phones to 18% from 12% on April 1, 2020, the day the smartphone PLI scheme was announced. 
 
As per India ICEA, over the last three financial years-- FY21 to FY23--the incremental GST of 6% has resulted in an additional cumulative revenue of Rs 42,897 crore. The total GST on mobile phones for the three-year period stood at Rs 1,28,691 crore. 

The final adjusted total outlay for the smartphone PLI scheme for a 5-year period now stands at Rs 38,601 crore as against the original Rs 41,000 crore, as iPhone-maker Pegatron started a year late. So far, the total disbursement for smartphone PLI stands at Rs 1,644 crore. 
 

“Currently, since only Rs 1,644 crore has been claimed as part of the PLI scheme till March 31, 2023, the incremental GST has created a surplus of Rs 41,253 crore,” the ICEA said in the letter addressed to revenue secretary Sanjay Malhotra. 
 
Calculating that, the incremental GST over the course of the smartphone PLI scheme would be around Rs 1,01,697 crore, the ICEA said. Of this, the central government will collect Rs 50,849 crore while retaining only its 50% portion, far more than the total outlay of the scheme. 
 
“In summary, even if only the Centre's GST was to be taken into consideration, the smartphone PLI scheme over the five-year period is 100% self-sustaining and will leave a revenue surplus of Rs 11,000 crore,” the industry body said. 

The total GST contribution during the tenure of the smartphone PLI scheme is expected to the tune of over Rs 3 lakh crore. The scheme was deferred by one year for the majority of the companies due to the pandemic and will now end in 2025-26. All the selected companies, barring Samsung, have taken the deferment. 
As per data shared with the government, since the scheme came into effect, over 120,000 new direct jobs have been created in the electronics sector, particularly in the smartphone manufacturing ecosystem. 
 
On average, over 60% of these new jobs are now occupied by women in the age group of 19-24, most of whom are first-time job seekers. By conservative estimates, at least 250,000 new indirect jobs may have been created to support the fast-growing electronics manufacturing ecosystem. 

The mobile phone exports have been gradually increasing due to the PLI scheme. In FY 2022-23, smartphone exports reached a high of $11.5 billion, a growth of over 50% over the previous year. 
 
The government has set a target of achieving $300 billion worth of electronics manufacturing by 2025-26, with $120 billion expected to come from exports. In this, mobile phones exports are expected to contribute more than $50 billion by 2025-26, emphasising the importance of mobile phone manufacturing and exports within the electronic ecosystem.