GST on Mobile Phones

The GST regime has introduced uniform tax brackets for almost every commodity, from packaged food to automobiles. A GST tax at the rate of 18% is also applicable on mobile phones. 

 

GST is a major factor that influences the prevailing prices of smartphones. Having clarity about the GST rate on mobile phones can help you get to the correct estimate of the price that you have to pay on its purchase.

 

So, read on to know more about the nature and impact of GST on mobile phone prices. 

Before you check the smartphone GST rates, let us introduce you to the concept of Harmonised System of Nomenclature (HSN). HSN are 8-digit codes used by the GST Council to categorise commodities under the GST regime.

 

Here is a table that you can follow to know the code of mobile phones and accessories as per the GST council, along with the breakup of the mobile GST rates. 

Overhauling the indirect tax regime, the Government of India in 2017 introduced a new indirect tax regime called the Goods and Services Tax (GST). Prior to its introduction, the sale and purchase of commodities attracted Value Added Tax (VAT) and excise duty.   

 

However, there was a discrepancy in the rates which were charged across states back then, making it difficult to set a uniform price. 

 

Currently, the applicable GST rate on mobile phones is 18%. Until 2020, the GST on mobile phones was 12%. The decision to hike GST rates on mobile phones was taken at the 39th GST Council meeting. 

 

As 18% of your phone’s value is a significant chunk of your purchase, GST rates considerably influence mobile phone prices. However, uniform tax slabs have reduced mobile prices compared to the post-GST regime.

 

Here is a table comparing the prices of mobile phones as per the pre-GST and post-GST regimes:

When you buy a mobile phone from a retailer from the same state, Central and State GST (CGST and SGST) are applicable at 9% each. On the other hand, if you purchase it from a retailer outside your state, an Integrated GST (IGST) of 18% is applicable.

SGST and CGST rates are applicable on intra-state purchases of a commodity. So, if you purchase a mobile phone from a retailer in your state, you will pay these two components of GST. However, an inter-state purchase of mobile would attract IGST.

The GST Rules underline two types of supplies based on their nature: composite and mixed. The concept of composite supply is associated with GST on mobile phones. 

 

Composite supply means the supply made by a taxable person to the recipient of a commodity having two or more taxable goods. These goods are generally provided in conjunction or bundled together.

 

When you purchase a mobile phone, it comes with other devices like a charger and USB cord. Under composite supply, the GST on mobile and other components will be the same. 

In Union Budget 2023, the Finance Minister has proposed to waive the import duty on various parts used in smartphones. Moreover, the government has also extended the exemption on the duty of import of lithium-ion cells for making smartphone batteries. 

 

However, the cost of imported mobile phones has increased with the introduction of GST. 

 

Prior to the GST era, imported mobile phones were exempt from the 10% cost levied as a social welfare surcharge, which was reimposed during the 2020 Union Budget. The charges in question are levied over and above the 20% basic customs duty.

 

As of now, the cost of imported mobile phones is calculated by adding the assessable value of goods to the basic customs duty and the other chargeable duty on the goods. 

 

As a result, the cost of imported mobile phones is usually higher than those produced locally, courtesy of GST.

You can claim Input Tax Credit (ITC) on mobile phones. However, you need to fulfil certain requirements in order to claim it:

• The mobile must only be purchased and used for business purposes

• The tax invoice must have the seller’s address, GSTIN, and name along with the name of the buyer’s company, address, GSTIN, and HSN code

• The recipient must have received the mobile device

• The provided must have submitted the GST reports and paid their GST due to the government

The introduction of GST brought homogeneity in the prices of mobile phones across the country. During the VAT regime, certain states used to charge a lower rate of tax than others. 

 

For example, prior to the GST era, Gujarat charged a VAT of 14% on mobile phones. This forced a large number of consumers to look for dealers elsewhere to buy the product at a cheaper cost.

 

In the GST era, the cost may be a bit higher than before, but uniformity reduces the risk of cascading effects on taxes. As a result, an individual will pay the same price as any other Indian resident for the same phone. 

The following are some of the benefits that dealers have been able to enjoy after the introduction of GST for mobile phones:

• Increase in Sales: A mobile phone has become a necessity rather than a luxury in today’s world. This has inflated the sales of mobile phones from GST-registered dealers.

• Healthy Competition: The uniformity in prices after the implementation of GST on mobile phones has helped promote healthy competition among sellers. 

• Fair Competition from E-commerce: Under the older regime, online players bought mobile phones from states with lower VAT and sold them in states with higher taxation. The GST has reduced this gap to a great extent.

 

The GST regime has made the taxation system simple and straightforward. In order to learn more about GST and its implication for other kinds of goods and services, you can visit Bajaj Markets!