From 22 September 2025 India’s electronics sector has witnessed a revolutionary transformation with the implementation of GST 2.0 reforms. The significant GST cuts rates on electronic items from 28% to 18% represents one of the most substantial tax reforms since GST’s inception in 2017, promising to reshape the nation’s technology consumption patterns, boost domestic production, and drive economic growth multifold.

Major GST Rate Cuts Transform Electronic Market

The GST Council’s 56th meeting delivered sweeping changes by slashing tax rates on key electronic appliances from 28% to 18%. This transformation affects major household items including air conditioners, televisions above 32 inches, dishwashers, monitors, projectors, and electric accumulators. The reform simplifies India’s tax structure from the previous four-slab system (5%, 12%, 18%, 28%) to just three main categories: 5% for essentials, 18% for standard goods, and 40% for luxury items making tax system more focused on middle and lower class citizens.

Television manufacturers have already responded aggressively to these changes. Sony has reduced prices ranging from ₹5,000 to ₹71,000 across its BRAVIA TV models, while LG announced discounts from ₹2,500 to ₹85,800 on models between 43 and 100 inches. Panasonic followed suit with price reductions ranging from ₹3,000 to ₹32,000. These immediate price adjustments demonstrate the direct benefits of tax rationalization to consumers.

Boosting Tech Goods Consumption Through Affordability

The GST cuts creates a powerful multiplier effect on consumer demand by making technology products significantly more affordable. Industry experts predict price drops of 8-9% across electronic categories, translating to savings of ₹3,500-₹4,500 on air conditioners and dishwashers, while large-screen TVs could see even more substantial reductions. A washing machine previously costing ₹30,000 under the old regime could now be priced closer to ₹27,500.

This affordability boost comes at a strategically important time, coinciding with the festive season and driving what Prime Minister Modi termed a “GST Savings Festival“. Consumer durable stores across India have witnessed a noticeable uptick in footfall, with retailers reporting very strong purchase enquiries spread across different product categories rather than being concentrated in few segments. The timing alignment with Navratri and the upcoming Diwali season maximizes the consumption impact of these reforms.

Strengthening Domestic Electronics Production

The GST cuts serve as a crucial catalyst for India’s electronics manufacturing ecosystem by reducing production costs and improving competitiveness. These reforms are expected to create stronger backward linkages in critical components such as compressors, displays, and semiconductors. MSMEs engaged in plastics, wiring, cooling systems, LED panels, and assembly services stand to benefit significantly from reduced input costs and increased demand from consumers.

India’s electronics manufacturing has already shown remarkable growth, with production surging from USD 48 billion in FY17 to USD 101 billion in FY23, representing a 13% compound annual growth rate. The country has successfully transitioned from importing 80% of smartphones to producing 99% domestically, with mobile phone production increasing 21 times over the past decade to reach USD 49.3 billion.

The Production Linked Incentive (PLI) schemes complement these tax reforms by attracting investments worth ₹1.32 lakh crore and boosting manufacturing output to ₹10.9 lakh crore as of June 2024. The combined effect of GST rationalization and PLI incentives positions India to achieve its target of ₹25.19 lakh crore in electronics production by 2026.

Economic Impact and GDP Contribution

India’s electronics sector contributes approximately 3.4% to the country’s GDP and is projected to increase to 4.7% by 2026. The sector’s rapid expansion supports the broader digital economy, which accounts for 11.74% of GDP (₹31.64 lakh crore) and employs 14.67 million workers. The digital economy is expected to grow twice as fast as the overall economy, contributing nearly one-fifth of national income by 2029-30.

The consumer electronics market, valued at USD 83.70 billion in 2024, is projected to reach USD 152.59 billion by 2033, exhibiting a growth rate of 6.90%. This growth trajectory is supported by rising disposable incomes, growing internet penetration, tech-aware youth, and an expanding middle class. The GST reforms will accelerate this growth by making technology products more accessible to price-sensitive consumers.

Manufacturing Ecosystem Development

The reduction in GST rates extend beyond consumer appliances to include critical manufacturing components. Silicon wafers now attract 5% GST instead of 12%, reducing costs for semiconductor manufacturing. Two-way radios have been brought down to 5% from 12%, benefiting defense and security equipment procurement. Electric accumulators, including power banks, now attract 18% GST instead of 28%, making energy storage solutions more accessible.

These reductions support India’s broader manufacturing ambitions under the “Make in India” initiative, which has already attracted foreign direct investment increases of 254% in the electronics sector since PLI scheme inception. The simplified tax structure reduces compliance burden while improving transparency, making Indian manufacturing more competitive in global value chains as reported by investindia.

Technology Access and Digital Inclusion

While major appliances received significant tax relief, mobile phones and laptops remain at 18% GST, maintaining price stability in these essential digital devices. However, industry associations continue advocating for including mobile phones in the 5% essential goods category, arguing that smartphones have become necessary digital infrastructure for education, healthcare, financial inclusion, and governance. But seems like we are not going get tax relief on smartphones down from 12%.

The current reforms still deliver substantial benefits for technology access. Monitors and projectors now taxed at 18% instead of 28% reduce costs for schools, offices, and digital learning centers. Renewable energy devices and solar photovoltaic cells attract only 5% GST, down from 12%, supporting clean energy adoption according to pib

Regional Economic Benefits

States with established electronics manufacturing hubs stand to gain significantly from these reforms. Tamil Nadu, with major electronics centers in Sriperumbudur, Oragadam, Kancheepuram, and Krishnagiri, will see reduced consumer prices and lower input costs for supply chain MSMEs. This strengthens the state’s growing Electronics System Design and Manufacturing (ESDM) exports and supports its position as a manufacturing hub of modern India.

The reforms particularly benefit emerging technology sectors. Drones now attract 5% GST instead of 18-28%, making them 13-18% cheaper and accelerating adoption in agriculture, defense, logistics, and infrastructure monitoring. This supports India’s goal of becoming a global drone manufacturing hub while expanding applications across various industries.

Export Competitiveness and Global Integration

The GST rationalization improves India’s export competitiveness by reducing production costs and simplifying tax compliance. Electronics exports have already contributed ₹4 lakh crore under PLI schemes, showcasing India’s growing role as a global manufacturing hub. The simplified tax structure, combined with reduced rates on key components, positions Indian manufacturers to compete more effectively in international markets as reported by investindia.

The reforms support India’s integration into global value chains by making domestic production more cost-effective compared to imports. With the electronics sector already reducing import dependency – mobile phone imports dropped from 21 crore units in 2014-15 to just 0.3 crore units in 2023-24 and the GST cuts will accelerate this import substitution trend in not just mobile phones but other electronic accessories.

Employment Generation and Skill Development

The electronics industry aims to provide 10 million jobs by 2025, supported by the demand boost from GST reforms. PLI schemes have already created 8.5 lakh direct and indirect jobs, demonstrating the employment potential of manufacturing growth. The increased consumer demand and production expansion will generate additional employment opportunities across the value chain.

The sector’s growth supports skill development initiatives, with the government partnering with 113 universities and institutions to enhance semiconductor education and research. This combination of tax reforms, production incentives, and skill development creates a comprehensive ecosystem for sustainable electronics industry growth.

Future Growth Trajectory

Prime Minister Modi has set an ambitious target of making India’s electronics sector worth ₹41.98 lakh crore by 2030, up from the current ₹13 lakh crore. That’s very big goal to achieve and The GST reforms provide crucial momentum toward this dream by stimulating domestic demand, reducing production costs, and improving competitiveness. The simplified tax structure creates a foundation for sustained growth while supporting the vision of “Viksit Bharat 2047.”

The consumer electronics market is projected to become the fifth-largest globally, driven by per capita GDP crossing USD 3,000 by 2025 and accelerating discretionary spending. The GST cuts ensure that this growth translates into increased domestic production rather than import dependency, supporting India’s self-reliance objectives.

Challenges and Opportunities Ahead

While the GST reforms deliver substantial benefits, some challenges remain. Dealers face difficulties liquidating existing high-tax inventory, potentially affecting short-term sales and requiring manufacturer compensation for margin impacts. However, the festive season timing helps offset these transition challenges through increased consumer demand.

The reforms create opportunities for premium product adoption as reduced prices make advanced features more accessible to middle-class consumers. Smart home devices, energy-efficient appliances, and IoT-enabled products benefit from both lower prices and growing consumer awareness of technology benefits.

The GST cut on electronic items represents a transformative policy intervention that addresses multiple economic objectives simultaneously.

By making technology products more affordable, the reforms boost consumer spending and stimulate demand growth.

By reducing production costs, they strengthen domestic manufacturing and improve export competitiveness.

By simplifying tax compliance, they reduce business operational burdens and encourage investment.

This comprehensive approach positions India’s electronics sector for sustained growth, supporting the country’s digital transformation while contributing significantly to economic development. The reforms demonstrate how strategic tax policy can serve as a powerful tool for industrial development, consumer welfare, and national competitiveness in the global technology landscape.

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