Rs 1.82 trn GST from cell phones 5x what PLI allocated

Goods and services tax (GST) collections from mobile device companies, amounting to Rs 1.82 trillion between 2020-21 (FY21) and 2023-24 (FY24), have already generated more than five times the revenue for the government compared to the Rs 34,149 crore allocated under the production-linked incentive (PLI) scheme for mobile devices over six years ending 2025-26 (FY26).

Currently, the GST on mobile devices stands at 18 per cent.

The Indian Cellular Association (ICEA), which provided the GST data, projects that GST collections from mobile devices between FY21 and FY26 are expected to reach Rs 3.09 trillion — over 9-10 times the amount allocated by the government to the mobile device PLI scheme by the end of its tenure.

The total PLI outlay for mobile phone manufacturing from FY21 through FY26 is estimated to peak at around Rs 34,149 crore.

However, firms eligible for PLI suggest that disbursements might be reduced by 10 per cent, closer to Rs 31,000 crore by FY26, as many eligible players have not qualified for the incentive.

Pankaj Mahendroo, chairman of ICEA, said, “When PLI schemes were first discussed in 2020, we informed the government that the then 12 per cent GST was more than sufficient to self-fund the proposed mobile PLI.

"The past four years of GST collections prove that smartphone PLIs are more than self-sustaining and can fund other PLIs.”

The association has been advocating for a reduction of GST back to the earlier rate of 12 per cent.

At another level, GST collections from FY21 through FY24 for mobile devices alone are already equivalent to 92 per cent of the total allocation made by the government for 14 PLI schemes, which is Rs 1.97 trillion.

If ICEA’s projection holds, the total GST collections from FY21 through FY26 will amount to 1.5 times the total allocation for these 14 PLI schemes.

The government announced the first three PLI schemes on April 1, 2020, including one for mobile devices.

On the same day, the GST on mobile phones was also raised from 12 per cent to 18 per cent.

The incremental GST from the 6-percentage-point increase on mobile devices has fetched the government Rs 60,837 crore between FY21 and FY24 — double the amount likely to be disbursed through the mobile PLI scheme over the six-year period (Rs 30,000 crore).

ICEA estimates that the incremental GST between FY21 and FY26, when the mobile device PLI scheme concludes, would amount to Rs 1.03 trillion.

If these projections hold, the government could earn an incremental GST three times greater than what it proposes to disburse to the mobile device sector through the PLI scheme.

The incremental GST from mobile phones alone could cover the costs of the PLI schemes for mobile phone manufacturing (Rs 34,149 crore), automobiles and auto components (Rs 25,938 crore), high-efficiency solar photovoltaic modules (Rs 24,000 crore), information technology hardware (Rs 17,300 crore), and drones and drone components (Rs 120 crore).

So far, the mobile PLI has disbursed around Rs 6,000 crore to eligible participants against an incremental GST collection of Rs 60,837 crore until FY24.

Even for major participants in the PLI scheme, such as Apple Inc’s vendors, it is evident that incremental GST collections far exceed their PLI disbursements.

Based on publicly available records of Apple’s turnover filed with MCA, which totals Rs 1.7 trillion for the period 2020–24 (including a projected revenue of Rs 67,000 crore in FY24), the government’s GST collection from Apple, at the rate of 18 per cent, would be around Rs 31,000 crore.

Considering the incremental GST (a 6 per cent increase since 2020), it would be Rs 10,500 crore.

However, the disbursement to Apple’s three vendors, who have been active in the PLI scheme since 2021, has been less than Rs 4,500 crore so far.