In April 2020, during the 39th GST Council meeting, significant changes were made to the GST on mobile phones in India. The previously set GST rate of 12% was abruptly increased to 18%, causing a shift in the market. Furthermore, the 2023 Budget put forth a proposal to raise the import duty on materials important for phone manufacturing. These changes directly impact the prices of mobile phones. Let’s understand the GST on Mobile phones in India and its applicability.
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Applicability of GST on Mobile Phones in India
Buying a mobile phone in India means being subject to the Goods and Services Tax (GST), regardless of whether it is a smartphone or a feature phone. This tax consists various components, such as Central GST (CGST), State GST (SGST), Union Territory GST (UTGST), or Integrated GST (IGST), depending on the seller’s location. To clarify, here’s what you need to know: –
Local Buyers: If you purchase a mobile phone from a seller within your state or union territory, you will encounter CGST (e.g., 9%) + SGST/UTGST (e.g., 9%) as part of the tax.
Out-of-State Buyers: When buying from a seller outside your state or union territory, the applicable tax is IGST, set at 18%.
What is the GST rate on mobile phones?
In the pre-GST phase, the prices of smartphones were constantly fluctuating due to the inconsistent state taxes. Fortunately, the implementation of GST has brought about a uniform 18% tax rate across the nation for smartphones falling under the category of HSN code 8517.
Let’s take a closer look into the GST rate for mobile phones and accessories, listed under the HSN (Harmonized System of Nomenclature) chapter 85.
| Category | HSN | GST Rate (%) |
|---|---|---|
|
Mobiles |
8517 |
18% |
|
Battery |
8506 |
28% |
|
Back Cover |
4202 |
28% |
|
USB Cable |
8504 |
28% |
|
Lithium-ion batteries |
85076000 |
18% |
|
Power bank |
8507 |
18% |
|
Memory card |
8523 |
18% |
|
Speakers, headphones, earphones |
8518 |
18% |
|
Plastic screen protector |
3919 |
18% |
|
Tempered glass screen protector |
7007 |
18% |
|
Wireless Network Phone Components |
85 |
12% |
Impact of GST on Mobile Phones in India
In the pre-GST era, purchasing a mobile phone often involved navigating through different excise and VAT rates in different states, resulting in a complicated process of establishing a stable price. However, with the introduction of GST, the implementation of a uniform 18% tax rate across the country has simplified this issue, leading to a more consistent pricing for mobile phones.
To better understand the impact of GST on mobile phone prices, let’s examine the differences between the price dynamics before and after its implementation.
| Particulars | Pre-GST | Post-GST |
|---|---|---|
|
Cost of manufacturing (a) |
₹8,000 |
₹8,000 |
|
Excise duty @1% (b) |
₹80 |
- |
|
Base value for VAT calculation (c) |
₹₹8,080 |
₹8,000 |
|
VAT @14%/GST @ 18% (d) |
₹1,131 |
₹1,440 |
|
Sale price quoted by manufacturer to retailer(e) |
₹9,221 |
₹9,440 |
|
Value addition/packing charges (f) |
₹500 |
₹500 |
|
Total value (g) |
₹8,580 |
₹8500 |
|
VAT @ 14%/GST @18% on above (f) value |
₹70 |
₹90 |
|
Total price |
₹8,650 |
₹8590 |
GST on Import of Mobile Phones
The recent Budget 2023 brought a glimmer of hope for the mobile phone manufacturing industry, as the customs duty for camera lenses and related parts was reduced to nil, from its previous rate of 2.5%. This measure was aimed at propelling the production of camera modules for cellular mobile phones.
Furthermore, the exemption for importing lithium-ion cells used in mobile phone batteries was extended until March 31, 2024, in hopes of bolstering the production of these essential components. However, the aftermath of the Budget 2020 should not go unnoticed. Prior to this, mobile phones were exempted from a 10% social welfare surcharge.
However, with the Union Budget 2020, this surcharge was reinstated on imported mobile handsets, adding an additional cost on top of the existing 20% basic customs duty, thus increasing their price as compared to domestically manufactured ones.
When bringing mobile phones into the country, the calculation of Integrated Goods and Services Tax (IGST) is dependent on the total value of goods, which includes customs duty. This value is determined by considering the assessable value of the goods, as well as the basic customs duty and any other applicable duties as per current laws. As a result, the overall expense of importing mobile phones in India has seen a rise.
Can Input GST Be Claimed on Mobile Phones?
If you have purchased a mobile phone for business purposes and use it for your business activities, you may be eligible to claim Input Tax Credit (ITC). However, there are certain conditions that must be fulfilled. The tax invoice must contain key information such as the company name, address, GSTIN, HSN code, and the amount of GST charged.
Additionally, it should also include the buyer company’s name, address, and GSTIN number. In essence, as long as you are using a mobile phone for business purposes and have a proper invoice with all the necessary details, you have the potential to claim ITC.
Benefits to the Dealers of Mobile Phone Due to GST
Changing Landscape of Online Sales: Previously, e-commerce platforms took advantage of varying VAT rates by purchasing phones from states with lower taxes and selling them in those with higher taxes.
Fairer Competition: The implementation of uniform tax rates across the nation has equalized mobile phone prices, promoting healthy competition among dealers.
Boost in Sales: With the ubiquitous need for mobile phones these days, it’s no surprise that dealers have experienced a surge in sales after obtaining their GST registration.
However, due to aligned tax rates, the gap between online and in-store prices has narrowed. It should be noted, however, that stricter criteria must be met in order to claim Input Tax Credit, such as following protocol for receiving the device, ensuring the supplier has filed GST returns, and ensuring taxes are paid to the government.
Conclusion
GST on mobile phones in India has increased sales and fair competition. This is due to the standardized tax rates, which have brought about a more level playing field and reduced the advantage of online sales. As businesses navigate these changes, it becomes increasingly crucial for them to have a thorough understanding of GST regulations, with the Input Tax Credit (ITC) emerging as a key factor in their success.
Frequently Asked Questions (FAQ)
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