Budget 2026: Retailers flag grey-market leakages, seek GST cut on entry-level smartphones

Mobile

• Retailers seek 5% GST on smartphones under Rs 10,000 to boost sales
• AIMRA seeks crackdown on grey-market exports and misuse of cashback schemes
• Retailers propose IMEI-level tracking to curb tax leakages and policy misuse

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Mobile retailers have urged the finance ministry to rationalise goods and services tax (GST) on entry-level smartphones and clamp down on grey-market exports, warning that policy misuse is causing significant revenue losses while hurting compliant retailers and consumers.

In a letter to Finance Minister Nirmala Sitharaman, the All India Mobile Retailers Association (AIMRA) called for a 5 percent GST slab on smartphones priced up to Rs 10,000, arguing that lower taxes would boost formal sales and reduce incentives for grey-market diversion.

The association said nearly 30 crore Indians still use feature phones. Rising memory and storage costs have pushed up entry-level prices, limiting adoption and access to digital public services. The GST rate on smartphones is 18 percent. This uniform rate applies to all mobile phones, including feature phones and high-end smartphones such as iPhones and Samsung Galaxy models.

AIMRA represents over 1.5 lakh mobile retailers, serving as the primary body for these small and large format sellers.

AIMRA said India sells around 1.5 crore mobile phones a month but nearly 30 lakh units are siphoned off through grey-market and export-misuse routes, leading to GST and customs revenue leakages running into hundreds of crores of rupees annually. The association submitted its representation after a meeting with the finance minister on December 10. Moneycontrol has reviewed a copy of the letter.

According to the retailers’ body, the problem has worsened due to price arbitrage — particularly in premium smartphones — after the strengthening of the US dollar.

In several instances, phones are sold informally in India, activated using Indian credit cards to avail bank cashback benefits, and later exported in bulk. These devices are then shown as new and unactivated, enabling aggregators to claim GST refunds and duty drawbacks despite prior domestic usage.

While reiterating its support for legitimate exports, AIMRA founder and chairman Kailash Lakhyani said misuse of export and incentive policies is distorting domestic pricing, damaging honest retailers, and undermining tax compliance even as India emerges as a major global mobile manufacturing and export hub.

To plug the leaks, the association proposed IMEI-level tracking across manufacturing, domestic sales, and exports, linked with GST filings and export documentation. Such tracking, it said, would help identify circular trading and repeat offenders without increasing compliance burden, and aligns with the government’s Digital India framework.

AIMRA also flagged the misuse of bank cashback schemes, arguing that mapping card transaction data with IMEI activation records would establish whether devices were genuinely sold to end consumers. The misuse, it said, enables unfair price undercutting and pushes trade towards informal channels.

The association has also asked the finance ministry to initiate a joint IMEI–GST–export data-based investigation, tighten governance around cashback schemes, and treat GST rationalisation as a market-formalisation step.

"With timely intervention under your leadership, these issues can be addressed in a structured and sustainable manner," Lakhyani said in the letter.