GST on Mobile Phones

Mobile phones and mobile accessories fall under Goods and Services Tax (GST) in India. Currently, the GST rate on mobiles is 12% (irrespective of whether it is a smartphone or a feature phone). The rate of GST on mobile electronic accessories is 18%.

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.

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

When a customer buys a mobile phone, as mentioned, 12% 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 12% mobile phone GST rate is divided equally into SGST (State GST) and CGST (Central GST). 

On the other hand, if the customer gets the phone from a dealer from another state, then 12% IGST will be applicable.

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.

Item

HSN CODE

GST RATE

Phones

8517

12%

Charger

8504

28%

Earphone

8518

18%

Battery

8506

28%

Power Bank

8504

28%

Leather Phone Case & Back Cover

4202

28%

Memory Card

8523

18%

USB Cable

8504

28%

Headphones

8518

18%

Plastic Screen Protector

3919

18%

Tempered Glass Screen Protector

3923

18%

Speakers

8518

18%

GST for Mobile Phones in India and Battery Issues

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 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 12%, 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, many renowned phone brands started some new exchange offers that allow users to buy 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%.

  • 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.

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