The introduction of GST has provided a simplified taxation system and ensured that product pricing is consistent across the country. It is applied to certain commodities and services, including mobile phones. Furthermore, it has eliminated the chance of price arbitrage.
At the 39th GST Council meeting, the rate of GST on mobile phones and accessories was raised from 12% to 18% with effect from April 1, 2020.
To understand GST on mobile phones thoroughly, we have composed this comprehensive guide. Here we’ll cover:
- Modifications in Mobile Phones Cost due to GST
- When CGST or IGST, and SGST is applicable?
- GST on Mobile Phone Applicability
- Value of Supply to Calculate GST on Mobile Phones
- GST Rate on Mobile Phones
- Import on Mobile Phones(GST )
- GST Impact Mobile Phone Cost, Issues, and Benefits
- Key Takeaways
Modifications in Mobile Phones Cost due to GST
Before the introduction of GST, VAT and excise were implemented on mobile phones. However, it was difficult to keep a consistent price of mobile phones. Because the VAT rates vary from state to state.
The tax rate is uniform across the country under GST, a uniform price for a mobile phone can be established. Moreover, the GST rate on mobile phones is currently 18 percent.
Check the following table comparing prices before imposing GST on mobile phones to the levy imposed under the GST regime:
Note that: Due to the elimination of the tax-on-tax effect, the price of the mobile phone has fallen after the introduction of GST.
When CGST or IGST, and SGST is applicable?
Customers must pay 18 percent GST on mobile phone purchases, as previously stated. However, if a buyer buys a phone from a dealer within state borders. Then, 18 percent will be split evenly between SGST (State GST) and CGST (Central GST) (Central GST).
On the other hand, if the buyer buys the phone from a dealer in another state, the IGST will be 18 percent. This obviously indicates that mobile phone imports (from one state to another) will be subject to an 18 percent IGST.
GST on Mobile Phone Applicability
The implementation of GST (Goods and Service Tax) helped to reform the Indian economy. In addition, GST is levied upon all mobile phones such as feature phones or smartphones, and there are no exceptions.
Check this example to understand this better:
Composite Supply Nature
A composite supply is defined as a supply that consists of two or more items or services. Further, it is naturally combined and supplied with one another in the ordinary course of business. However, these goods can't be purchased separately.
One of these is a primary supply, and its GST rate is taken into account while creating the invoice.
Let’s check the case of mobile phones:
Generally, mobile phones are usually packaged with a charger and USB cable. Moreover, both of these accessories are required to use the handset. Consequently, the same GST rate that applies to the phone also applies to the charger and USB cord.
However, in a few brands, the earphones are sold separately from the phone, which is classified as mixed supplies because it is not naturally bundled.
Value of Supply to Calculate GST on Mobile Phones
Check the following crucial pointers:
Value of Supply
The value of supply under GST is the capital that the seller obtains from the buyer in exchange for selling products or services. Furthermore, GST is charged on the transaction value in the event of related parties. The value at which unrelated parties would transact in the normal course of business is known as transaction value.
Exchange Offers
Customers can acquire new smartphones in exchange for old ones from smartphone dealers. Besides, they only have to pay the difference. Nevertheless, under the VAT system, the reduced amount was not taxable. However, barter is included in the definition of supply under GST, thus even the lower price is taxable.
For instance, a new phone is on sale for Rs. 20,000 for an exchange of an old mobile phone. The new phone costs Rs.25,000 without any exchange. In this scenario, GST will be applied to the sum of Rs.25,000.
Discounts Exclusion
Trade discounts and quantity discounts are common in everyday business. As a result, discounts stated on the invoice are not taken into account when calculating the taxable value.
Discounts are not considered when assessing taxable value if the following two requirements get fulfilled.
- Discounts— showcased in the relevant invoices.
- ITC should be reversed on the discount obtained as per credit note.
GST Rate on Mobile Phones
As previously stated, the price of a smartphone was not fixed due to taxes that differed from state to state. On the other hand, GST imposes a standard 18 percent tax across the country. The HSN code for this item is 8517.
HSN chapter 85 deals with the GST rate on mobile phones and accessories.
Let's look at the GST rates for mobile phones and accessories, which are as follows:
GST Import on Mobile Phones
Previously, mobile phones were excluded from the 10% social welfare surcharge. However, the Union Budget 2020 has reinstated a social welfare surcharge on imported mobile handsets, in addition to the existing 20% basic customs duty. It further makes them more expensive than locally manufactured handsets.
Furthermore, the value of goods for calculating IGST equals the assessable value of goods plus basic customs duty plus any other duty applicable on goods under any law now in force. In India, the cost of importing mobile phones has risen as a result of this.
GST Impact Mobile Phone Cost, Issues, and Benefits
The implementation of GST has resulted in price homogeneity across the country. Furthermore, mobile phones were subject to a 5% VAT and a 1% excise levy under the VAT regime.
However, the tax rate in some states, such as Gujarat, was as high as 14 percent. As a result, anyone willing to pay a cheap price would purchase from a select group of sellers.
However, the GST imposes an 18 percent tax on all goods and services across the country. Higher GST tax rates, on the other hand, have increased the cost of mobile phones while lessening the cascading effect on taxes.
Benefits of GST Impact on Mobile Phones:
Following is the list of benefits. Check out:
(A) Increased sales: Mobile phones have become a necessity in today's generation. Moreover, mobile phone sales are increasing day by day for mobile phone retailers who have registered for GST.
(B) No longer online benefits: Under the VAT regime, e-commerce players bought mobile phones in lower-tax states and sold them in higher-tax states. Nevertheless, prices on the internet are still lower than in stores. However, the chasm has narrowed.
(C) Increased competition: Prices have become more consistent across the country as a result of standard tax rates. This encourages healthy competition among mobile phone sellers.
Key Takeaways
We have summarised the crucial points from this guide for your reference. Let’s learn:
- The GST rate on mobile phones is currently 18 percent.
- GST is levied upon all mobile phones such as feature phones or smartphones, and there are no exceptions.
- The same GST rate that applies to the phone also applies to the charger and USB cord.
- Union Budget 2020 has reinstated a social welfare surcharge on imported mobile handsets.
- The implementation of GST has resulted in price homogeneity across the country.
- Higher GST tax rates have increased the cost of mobile phones while lessening the cascading effect on taxes
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