The introduction of the Goods and Services Tax (GST) in India marked a significant change in the country's tax system. It brought several items under its ambit, including mobile phones. However, many people are still unclear about how GST affects the cost of mobile phones and how it is calculated. In this article, we will take a closer look at GST for mobile phones and everything you need to know about it.
What is the GST on Mobile Phones in India?
In India, GST on mobile phones is fixed at 18%. This rate applies to all kinds of mobile devices, including smartphones, basic feature phones, Android tablets, and iPads. This uniform GST rate has been in place since 1st April 2020, replacing the older VAT system with a single tax rate across all states.
Example:
If a mobile phone is priced at Rs. 15,000, the GST at 18% will be Rs. 2,700.
So, the total cost including GST will be Rs. 15,000 + Rs. 2,700 = Rs. 17,700.
GST calculation on mobile phones
GST is calculated by multiplying the tax rate with the price of the mobile phone. In the example above, we calculated that the GST on a mobile phone that costs Rs. 20,000 would be Rs. 3,600 (18% of the price).
The formula to calculate GST: GST amount = (Price of product x GST rate) / 100
So, applying this formula, we can calculate the GST on any mobile phone based on its price and the applicable tax rate.
What is the impact of GST on mobile phones and accessories?
The impact of GST on mobile phones and accessories has been mixed. While the GST on mobile phones and accessories has been reduced from 12% to 18%, some manufacturers increased the prices of their products to offset the increased input costs. However, the overall impact has been positive, leading to increased compliance and growth in the mobile phone and accessories market. If you're a business dealing with mobile phones, understanding GSTR 1 and its filing procedure is crucial for staying compliant.
How does GST affect the cost of mobile phones?
Before the implementation of GST in India, mobile phones incurred various taxes such as excise duty and varying VAT rates across states. This led to complexities in pricing, with different prices in different regions due to the tax structure. For instance, a mobile phone costing Rs. 10,600 before GST included excise duty, VAT, and other charges, resulting in a final sale price of Rs. 10,684.
Post-GST, the tax system streamlined with a uniform rate of 18%, eliminating cascading taxes and the tax-on-tax effect. This simplification has led to a more consistent pricing structure nationwide. For example, a mobile phone with the same manufacturing cost of Rs. 10,000 now incurs GST, resulting in a total price of Rs. 10,605, which reflects the reduced complexity and potentially lower costs for consumers due to the elimination of multiple taxes.
Understanding how GST affects the cost of mobile phones is essential to make an informed buying decision. By comparing prices and taking tax into account, you can choose the best deal on your mobile phone purchase. It is also essential to keep in mind that GST rates may change in the future, so staying informed is crucial. If you are a business owner looking to register for GST, ensure that you have all the necessary GST registration documents ready before applying.
GST on mobile phones – Types of GST applicable
The type of GST charged on mobile phones depends on where the dealer is located and the nature of the sale. There are two main cases:
1. CGST and SGST – For sales within the same state or union territory:
If you buy a mobile phone from a seller in the same state or union territory, the GST is split into two parts:
- Central GST (CGST) at 9%
- State GST (SGST) at 9%
This adds up to a total of 18% GST.
2. IGST – For sales between different states or union territories:
If you buy a mobile phone from a seller based in another state or union territory, Integrated GST (IGST) at 18% is charged on the full price of the phone.
What is the GST rate on mobile phones?
Under the pre-GST system, smartphone prices fluctuated due to varying state taxes. With GST's implementation, a uniform rate of 18% applies nationwide to mobile phones, categorized under HSN code 8517. Here's a simplified table summarising GST rates for mobile phones and related accessories:
HSN code |
Product name |
GST rate |
8517 |
Mobile phones |
18% |
8518 |
Speakers, headphones, earphones |
18% |
8507 60 00 |
Lithium-ion batteries |
18% |
8507 |
Power bank |
18% |
8523 |
Memory card |
18% |
7007 |
Tempered glass screen protector |
18% |
3919 |
Plastic screen protector |
18% |
85 |
Parts for the manufacture of cellular networks |
12% |
These rates ensure consistency in taxation across India, simplifying the pricing structure for consumers and manufacturers alike. To ensure accurate GST filing and registration, businesses should refer to the GST state code list for the correct state codes.
What is GST on Mobile Phone Repair Services and Spare Parts?
In India, mobile phone repair services are taxed at 18% GST. This applies to the labour charges for repairing the phone. Repair shops must charge this tax on the service they provide.
Apart from labour, spare parts used during repairs—like screens, batteries, charging ports, headphone jacks, and other internal parts—are also taxed at 18% GST. However, repair shops can claim Input Tax Credit (ITC) on these parts, which allows them to reduce their total tax by adjusting the GST they’ve already paid on the items used.
GST on import of mobile phones
In recent developments, Budget 2023 eliminated customs duties on camera lenses and components crucial for manufacturing cellular mobile phones, previously taxed at 2.5%. Additionally, the exemption on lithium-ion cells used in mobile phone batteries was extended until March 31, 2024. However, Budget 2020 reintroduced a 10% social welfare surcharge on imported mobile handsets, in addition to the existing 20% basic customs duty. This has increased the cost of imported mobile phones in India, with IGST applied on the assessable value comprising customs duties and other applicable charges, further impacting their pricing dynamics in the market.
How to determine the taxable value of supply on mobile phones under GST?
The taxable value of supply is the amount a seller charges a buyer for goods or services. Under GST, this is usually the price both parties agree upon. Whether the buyer and seller are related or not, GST is generally applied to this agreed price.
Exchange offers: Mobile phone dealers often allow customers to exchange their old phones and pay the balance for a new one. Under GST rules, this exchange is treated as a barter. GST is charged on the full value of the new phone, not the reduced amount. For example, if a new phone costs Rs. 25,000 and the customer gives an old phone worth Rs. 5,000, GST will be applied on Rs. 25,000.
Discounts exclusion: Trade and bulk quantity discounts are common in the mobile industry. If a discount is given and clearly shown on the invoice, it can be excluded from the taxable amount. But certain rules must be followed—such as mentioning the discount on the invoice and reversing any Input Tax Credit (ITC) related to it using a credit note. This ensures the taxable value is adjusted correctly as per GST rules.
Can ITC be claimed on mobile phones?
Input tax credit (ITC) on mobile phones can be claimed under GST if they are purchased for business purposes. The invoice must include details such as the company's name, address, GSTIN, HSN code of the mobile phone, and the GST amount charged. It's essential that the mobile phone is received by the recipient, the supplier files their GST returns, and pays the tax to the government. Adhering to these guidelines is crucial for businesses seeking to claim ITC on their mobile phone purchases.
Conclusion
To sum up, GST has a big impact on the final price of mobile phones, whether they are bought within India or imported. An 18% GST is applied to mobile phones, accessories, repair services, and spare parts. This affects both businesses and customers.
It’s important for businesses to know the correct GST rates, how to calculate the taxable value, and when they can claim Input Tax Credit (ITC). This helps them follow GST rules properly. Keeping proper records and following the regulations is key to managing tax costs efficiently.
Explore more related articles on GST
| Eway Bill | ||
