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GST on Mobile Phones

GST on Mobile Phones – Types of GST Applicable  

Mobile phones attract a Goods Services Tax rate of 18%, compared to 12% earlier, after the GST Council corrected the inverted duty structure that was being faced by the industry. Before the inception of Goods and Sales Tax (GST) in India, Value Added Tax (VAT) was levied on the purchase of all electronic entities including mobile phones. The applicable VAT rates on mobile phones were different in different states. 

As per the rules of GST, the tax rate on mobile phones is the same across the nation. GST rates applicable on mobile phones are 18% and the mobile HSN code is 8517.

 When SGST & CGST or IGST is Applied – Inter and Intra State Tax

When a customer buys a mobile phone, as mentioned, 18% of GST on the phone has to be paid by the customer. If the customer is buying a phone from the dealer within the state premises then that 18% is divided equally into SGST (State GST) and CGST (Central GST). 

On the other hand, if the customer gets the phone from the dealer from another state, then 18% IGST will be applicable. This obviously implies that the import of mobile phones (from one state to another) will have to face 18% IGST.

GST for Mobile Phones and Accessories – Significance of HSN Code

GST on smartphones and accessories for the same are determined under HSN Chapter 85. There are different rate slabs under HSN Chapter 85 according to which mobile GST rate is applicable on the purchase of mobile phones. 

Hence it is mandatory to mark the correct HSN code to prevent wrong invoicing and surplus charges.

Product Name HSN Code Mobile Phone GST Rate
Mobile Phones 8517 18.00%
Charger 8504 18.00%
Earphone 8518 18.00%
Lithium-ion Batteries 8506 18.00%
Power Bank 8504 18.00%
Memory Card 8523 18.00%
USB Cable 8504 28.00%
Speakers 8518 18.00%
Headphones 8518 18.00%
Plastic Screen Protector 3919 18.00%
Tempered Glass Screen Protector 3923 18.00%
Parts for the manufacture of phones and more 85 12.00%

GST for Mobile Phones in India and Battery Issue

Indian phone companies had asked the government to change the GST rate for lithium-ion batteries and charge a 12% tax on them as they are primarily used to manufacture the phone. Parts that are used for the phone have levied a fee of 12% while these batteries were getting charged 28% and it is this discrepancy that led to the plea. 

However, it was also reported levying SGST, IGST, and CGST affects the supply chain adds interpretational challenges and makes the viability of low-scale production more difficult.

After the plea gained momentum, the government decided to slash GST rates of around 50 items including mobile accessories, and companies have assured clients that they will ensure the lowered GST rates will reflect as a reduction in the purchase price as well. 

The decision also helped the mobile phone industry of India as it lowered the tax on lithium-ion batteries.

How does GST Benefit the Dealers of Smartphones?

  • In today’s generation, where having a smartphone has become a necessity, sales are increasing day by day for the electronic goods manufacturers & dealers having GST registration. 
  • Before GST, under the VAT regime, the price of a smartphone wasn’t fixed as it varied from state to state. 
  • GST provides the same taxation rate across all the states in India with a market value of 18% and the related HSN code is 8517.

What is the Impact of  GST on Mobile Phones and Accessories?

Offers with taxed interchange: After the introduction of GST on smartphones with a taxation rate of 18%, many renowned phone brands started some new exchange offers that allow users to buy a new one against their old handsets. 

End of Online benefits: Before the inception of GST, there were a lot of attractive offers that varied with different prices in the retail stores under the VAT regime. Anyone could purchase from selected stores where the VAT rate was low as compared to others. But this indent is closed for the consumers as GST has been implemented uniformly across the country.

New Indirect tax system: In India, there were 36 VAT authorities (29 States and 7 Union Territories) and apart from that, 29 jurisdictions had a VAT rate on smartphones of 5% alongside a 1% excise tariff. In some advanced cities such as Punjab, Rajasthan, and Chandigarh, there was a VAT rate of 8.9%. Now GST at  18% is applicable to the current 28 States and 8 Union Territories, as opposed to the earlier rate of 12% on smartphones and accessories. GST rate is uniform for all traders having GST registration.

Effect on the price of smartphones: GST has impacted the production of phones and phone accessories as they have become a bit expensive as they perform under cheaper tax rates due to privileges given supporting the government’s ‘Make in India’ policy. On the other hand, looking at the brighter side, this has also resulted in more job opportunities. 

How does the GST Rate Impacts the Economy?

The introduction of GST served as a major transforming tool for the Indian economy. It emerged as a game-changer by bringing a net price for all goods and services under a single taxation system. Some of the key impacts of GST on the Indian economy are:

Single/uniform tax regime: Before the inception of GST, multiple taxes were charged at various points of the supply chain. However, after the introduction of GST, it has become easier for taxpayers due to uniformity in the tax system.

Increase in the exports: Due to Goods and Services Tax, there has been a drop in the production cost, which has built competitiveness in pricing the exports in the international market.

Increased competition: GST has brought down the prices of goods and services, which has led to an increase in the competition and less tax burden on the final consumer. It has also helped in increasing the scope of production.

Simple and lucid structure: The single taxation system has simplified tax calculation. Under GST,  taxes are calculated based on simple slabs instead of going through various tax systems, which has helped save a lot of time and effort.

GST on Mobile Phones - FAQs

Q1. What is the value of supply to measure the GST liability on phones?

In phones, the value of supply is the amount that the dealer gets on selling the phone. If the transaction is between the two parties, the price is charged from the unrelated party in normal business situations.

Q2. What is the value of supply when the older phone is exchanged for a new one?

Mobile phone dealers sometimes give attractive exchange offers where the customer can trade on an old phone in exchange for a new one, and they need to pay the amount over and above the value of the old one. The GST covers this transaction in the definition of the value of supply, and the tax is levied on the transaction.

Q3. Is there GST on the discount that I got when I purchased a phone?

If you get a discount, then the discount is excluded from determining the taxable value under GST.

Q4. What are the types of GST when I buy a phone?

Typically, it includes CGST, SGST, or IGST.

Q5. What is the GST rate on a memory card?

It is 18%.

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