Like other goods and services, electronics and electrical products are also liable for taxation under the GST regime. The implementation of this tax and the consequent subsuming of all other regimes have impacted the electronics industry and its components in different ways. To make the most of the application of GST on electronics, both manufacturers and consumers of these products should be aware of its implications.
Previously, most Indian states levied a VAT on home electronic appliances at the rate of 11-12.5%. On the other hand, the same segment of electronics was also imposed with an excise duty at the rate of 12.5%. Resultantly, the average tax rate inclusive of CST and local taxes rounded up to 25% to 26%.
With the introduction and implementation of the GST on electronic items, the above bifurcation in taxation has been done away with. Now they only attract GST at a rate ranging between 18% and 28%. It must be noted that different electronic items are taxed at a different rate under this new GST regime.
This table illustrates how different electronic items were taxed under this regime –
|S.N.||Category||GST Rate on Electronics||Type of Electronics Items|
|1.||Renewable energy electronic parts and devices||5%||Biogas plant,
Solar power-based devices, Waste to energy plants, wind-operated electricity generators, etc.
|2.||Mobile phone||12%||All old and new cell phone models.|
|3.||Generation equipment, T&D, and Allied electrical products||18%||Electromagnets, printed circuits, electrical resistors, electrical apparatus, electrical insulator, laboratory and industrial electric furnaces and ovens, electrical insulator, Diodes, transistors, etc.|
|4.||Consumer durables finished and semi-finished professional equipment||28%||Vacuum cleaner, 32-inch television, washing machine, AC, electrical grooming products like – hair clipper, shaver, sound, and video recording and reproducing apparatus, static converter, etc.|
It must be noted that GST on certain electronics increased or decrease with the announcement of the new budgets. For instance, previously the GST on mobile phones was 15%, which has now been revised to 18%. The revision in GST rate on electronics is described as an endeavour to correct the duty structure.
In general, the impact of GST on electronics industry has been somewhat negative over the past years. Also, an increase in tax rate by 2-3% always trickled down to the end-users.
Despite being extensively purchased by a large segment of the Indian household, electronics are treated as ‘luxury’ items in the country. Also, most items under this segment attract GST at the rate of 28%, which is predominantly reserved for the ‘Luxury goods and services’ category.
This is why leading household electronics appliances manufacturers like Godrej, Samsung, Voltas, Bajaj, etc. are unable to provide significant GST benefits to end-users. Furthermore, individuals are often in need of detailed clarification on the application of current tax deductions and exemptions extended by different states.
For instance, manufacturers based in Mumbai availed benefits under GST as they were paying Octroi at 5% post other taxes on household electronics appliances.
Experts anticipate a hike in the price of consumer electronics like refrigerators, vacuum cleaners, televisions, air-conditioners, etc. due to an increase in both tax and inflation rates. On the contrary, the impact on electrical machinery used for commercial purposes is expected to remain stable.
The consumer electronics industry based in India has been in favour of lowering GST on electrical items and waiving import duty of semi-finished electrical parts for a significant period. It is because the entire electronics industry, especially consumer durables, has been relatively dormant due to increased customs duties, volatility in the value of foreign currencies and commodity market, global economic impact, etc.
On top of everything, suppliers based in India face stiff competition from cheap electronics component importers. At this point, the domestic electronics industry can benefit to a great extent if the government formulates policies that would help to lower the input cost to produce components.
For instance, reducing the primary customs duty on manufacturing material will prove useful in reducing input costs. As a result, manufacturers will become more competitive.
Leading household electronics appliances manufacturers believed that lowering the GST on electronics that are categorised under the 28% slab would prove useful in offsetting price pressure. They also thought that such a move would spur a favourable demand for popular electronics appliances like 32-inch television and air conditioners.
It is expected that reducing the GST rate on electronic items will boost the demand for such consumer electronics goods in the domestic market. Consequently, a positive reduction in tax rate will also improve affordability and pique greater interest in investments in the component manufacturing industry.
HSN chapter 85 has the HSN code for electrical machinery and equipment and the parts.
You can use the following formula to calculate the electronic item GST rate:
Original Cost*[100/(100+GST%)] Net Price = Original Cost – GST Amount.
If the TV was bought by the proprietor needs to be used for business purposes then, ITC can be claimed.
The Goods and Services Tax (GST) is divided into five separate rates based on the product: 0%, 5%, 12%, 18%, and 28%.
The Goods and Services Tax (GST) has benefited farm equipment, solar and wind-related equipment, but it has had little impact on industrial equipment.