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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. 

GST on Mobile Phones and Accessories in India

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. 

Product/Commodity

HSN Code

CGST Rate

  SGST Rate

  IGST Rate

Mobile phones

8517

6%

  6%

  12%

Power bank

8507

8000

9%

  9%

  18%

Tempered glass screen protector

7007

9%

  9%

  18%

Tempered plastic screen protector

3919

9%

  9%

  18%

Memory card

8523

9%

  9%

  18%

Lithium-ion batteries

8507 6000

9%

  9%

  18%

Headphones, Earphones, Speakers

8518

9%

  9%

  18%

Chargers and Adapters

8504

9%

  9%

  18%

Leather Phone Back Covers

4202

9%

  9%

  18%

How Did the Price of Mobile Phones Change Due to GST?

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:

Particulars

Pre- GST Price

Post- GST Price

Production Cost

₹10,000

₹10,000

Excise duty at 1%

₹100

NA

Base Value 

₹10,100

₹10,000

14% VAT/18% GST 

₹1,414

₹1,800

Sale Price Quoted by the Producer to the Retailer

₹11,514

₹11,800

Packing Charges

₹500

₹500

Total Value 

₹10,600

₹10,500

14% VAT/18% GST on Packaging Charges

₹70(1,484-1,414)

₹90(1,890-1,800)

Total price

₹10,670

₹10,590

Types of GST Applicable on Mobile Phones

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.

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

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.

What is the Nature of Composite Supply?

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. 

Impact of GST on Import of Mobile Phones

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.

Implication of GST on Exchange and Discount Offers

Dealers tend to offer different types of discounts and exchange offers on mobile phones which are either sold online or through a physical store. Here is how GST has impacted exchange and discount offers available to you.

1. Exchange Offers:

An exchange offer typically implies a trade-up of one’s old phone. You can avail of a new handset in exchange for the old one. All you have to do is pay the difference between the old handset’s resale value and the cost of the new device. 

 

During the earlier tax regime, the difference in the value of new and old devices was not taxable. However, under the GST regime, this sum attracts a similar smartphone GST rate of 18%. As such, the reduced price becomes taxable as well. 

 

To illustrate, let us assume that an individual buys a phone worth ₹30,000 for ₹25,000 if they trade in their old phone. However, as per the GST provisions, the tax will be calculated on the full amount of ₹30,000.

2. Promotional Discounts: 

Promotional discounts tend to be a big part of the smartphone industry. As part of the GST regime, discounts that are reflected in the invoice are excluded when calculating the tax that is payable. 

 

Another condition that must be met is the reversal of the input tax credit (ITC) on the discount received as per the credit note.

Read More

Can ITC be Claimed on Mobile Phones?

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

How does GST Impact the Price of Phones and Are There Any Benefits?

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. 

What are the Benefits to the Dealers of Smartphones?

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!

FAQs on GST Impact on Mobile Phones

What is the HSN code applicable to mobile phones?

The HSN code applicable on mobile phones is 8517.

What is the applicable GST on mobile accessories?

The applicable GST on mobile accessories is 18%.

How does GST benefit smartphone dealers?

GST encourages healthy competition among smartphone dealers while increasing sales. It also reduces the fraudulent sale of smartphones that online dealers used to previously source from the states at lower tax rates.

What is the GST on smartphones?

The smartphone GST rate is 18%.

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

Discounts given before or during the sale that are subtracted from the trade value at that time are exempt from GST.

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