GST on Mobile Phones

Introduction

The GST rate for mobile phones and accessories was raised from 12% to 18%. Budget 2023 also recommended an increase in import duty on phone-making materials. Mobile phone prices rise as a result of such policies. 

How did the price on mobile phones change because of GST?

Prior to the implementation of GST, mobile phones were subject to a variety of different taxes. This included luxury taxes, VATs, and other taxes that differed from state to state. After GST was introduced in 2017, all these taxes were subsumed into one tax – GST. The current GST rate for mobile phones is 18%, regardless of whether it is a new or used phone.

GST on Mobile Phones -The Types of GST Applicable

The current GST on mobile phones is divided into CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax). CGST is a tax imposed by the Central Government, while the State Government imposes SGST. The rate for both of these taxes is 9%, which means that the total GST on mobile phone is 18%. There are different mobile GST rate depending on the location. 

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

In cases of inter-state purchases, i.e., when the seller and the buyer are from different states, IGST (Integrated Goods and Services Tax) is applicable. The rate for this tax is 18%, which is higher than CGST and SGST, as it incorporates both central and state taxes. In contrast, intra-state purchases, i.e., when both the seller and buyer are from the same state, only CGST and SGST apply.

What is Mobile GST Rate on Mobile Phones and Accessories – Significance of HSN Code

GST on Mobile Phones in India and Battery Issues

The Government of India recently imposed 18% GST on mobile phone batteries. This is because of the reason that mobile phone batteries pose a significant environmental hazard if not disposed of properly. The levy of GST on mobile phones is intended to discourage people from buying over-the-counter cell phone batteries and ensure that they are getting these items only from authorized dealers who can properly dispose of them in an eco-friendly manner. Moreover, it is important to remember that any price discount given by the seller on spare parts and components of mobile phones (except batteries and chargers) will not be eligible for GST exemption.

How is GST Beneficial to the Dealers of Smartphones?

●    GST on phones has helped the dealers of smartphones by providing a unified rate across states. This has made it easier for them to calculate the input tax credit and claim refunds, reducing paperwork.

●    It has also simplified compliance procedures, making it easier for them to comply with the tax laws.

●    Additionally, GST helps reduce costs associated with multiple taxes, such as transportation costs due to inter-state transactions.

●    Lastly, GST on phone eliminates cascading effect of multiple taxes resulting in increased efficiency and improved profitability for dealers.

This helps them pass on some of these benefits to consumers through lower prices. Understanding the applicable GST on mobile phones can make all the difference when shopping for new or used smartphones in India. With the help of GST, dealers can benefit from a unified tax rate and reduced paperwork, allowing them to pass on some of their savings to customers. Furthermore, it helps protect the environment by discouraging over-the-counter purchases of cell phone batteries and ensuring that they are disposed of in an eco-friendly manner.
 

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

●   Offers with taxed interchange: 

GST also allows customers to avail offers with taxed interchange. This means that a customer can purchase phones and accessories through cash, card, or wallets and get the same amount of discount that would have been available if they had purchased it before taxes were imposed. For instance, if a customer buys a phone worth Rs 10,000 at an offer price of Rs 8,000, they will get the discount (Rs 2,000) even after GST has been applied.

●    End of Online benefits:

The GST levy has resulted at an end to online benefits and discounts on mobile phones. Previously, customers could avail of discounts by shopping from e-commerce websites as they didn't have to pay sales tax or VAT. However, after the introduction of GST, such offers are no longer valid as GST applies to all kinds of transactions regardless of their medium.

●    New Indirect tax system:

The introduction of GST has brought about a unified indirect tax system in India. It has replaced multiple taxes with a single tax, making it easier for the government to monitor tax collection and ensure compliance. This benefits customers and dealers, as they can now make informed decisions while buying or selling mobile phones due to better access to information on applicable taxes.

●    Effect on the price of smartphones: 

The overall effect of GST on the price of mobile phones has been marginal. It is estimated that the prices have increased by around 2-3% in some cases due to the levy of GST. However, this may vary from product to product depending on its value and applicable tax rate.

●    GST on import of mobile phones: 

GST is also applicable to imported mobile phones. The import duty, which was earlier calculated separately, is now part of the GST rate. This makes it easier for the customer to understand how much they are paying and receive a single bill for their purchases instead of multiple bills.
 

Can ITC Be Claimed on Mobile Phones?

Yes, Input Tax Credit (ITC) can be claimed on mobile phones and accessories. GST-registered dealers can claim the input tax credit if they purchase mobile phones from other GST-registered dealers. This helps them reduce their overall tax burden while increasing efficiency in paperwork and compliance procedures.

Benefits of GST to the dealers of smartphones

1.    Increased sales turnover due to reduced paperwork and compliance procedures.
2.    Unified tax rate across the country, leading to fewer hassles while dealing with different states.
3.    Lower production costs as dealers no longer have to bear the cascading effect of multiple taxes.
4.    Improved profitability due to increased efficiency and lower cost structure.
 

Implication of GST on Exchange and Discount Offers:

The introduction of GST has made it easier for customers to avail of exchange and discount offers. As GST is included in the purchase price, customers can now avail of the same benefits without having to worry about additional taxes. Furthermore, dealers are able to offer competitive prices as they no longer have to bear the burden of multiple taxes such as VAT, service tax, and excise duty. As a result, customers can get the best value for their money when buying mobile phones and accessories.

How to calculate GST on mobile phone

Suppose you are buying a phone worth Rs 10,000 at an offer price of Rs 8,000. The applicable GST rate is 18%.

Therefore, the total amount (including taxes) would be calculated as follows:

Total Amount = Offer Price + (Offer Price * GST Rate/100) = 8,000 + (8,000*18/100)
Total Amount = Rs 9,440

Hence, if a customer buys a phone worth Rs 10,000 at an offer price of Rs 8,000, they will get the phone for Rs 9,440 after paying the applicable GST.

The GST on mobile phones has brought about a unified indirect tax system in India. It has made it easier for customers to avail exchange and discount offers and claim input tax credits on purchases from other GST-registered dealers. The overall effect of GST on mobile phone prices has been marginal and is estimated to be around 2-3% according to the GST on mobile phones 2023.
 

How does the GST Rate Impacts the Economy?

The GST rate impacts the economy in many ways. It helps boost economic growth by encouraging more people to buy goods and services by reducing their overall tax burden. At the same time, it leads to better compliance among businesses, leading to improved revenues for the government. The various ways through which the GST  rate impacts the economy:

●    Single/uniform tax regime: 

The introduction of GST has largely simplified the taxation system in India. It provides a uniform tax rate that is applicable throughout the country, thus eliminating any kind of discrimination between states. This is beneficial for both customers and businesses as they now have a single set of rules to follow while dealing with taxes.

●    Increase in the exports: 

Single/uniform tax regime: The introduction of GST has largely simplified the taxation system in India. It provides a uniform tax rate that is applicable throughout the country, thus eliminating any kind of discrimination between states. This is beneficial for both customers and businesses as they now have a single set of rules to follow while dealing with taxes.

●    Increase in the exports: 

GST has also provided a boost to exports. This is because the GST rate in India is lower as compared to other countries, thus making it easier for Indian exporters to compete with their foreign counterparts. This has led to an increase in exports of goods and services from India and thereby providing a boost to the economy.

●    Increased competition: 

GST also increases competition between businesses. This is because GST helps them lower their costs, thus enabling them to offer competitive prices and better-quality products. This helps customers get the best value for their money while driving businesses to be more efficient and productive.

●    Simple and lucid structure: 

The GST system is relatively simple and easy to understand. This helps businesses save time and money on compliance procedures as they are now familiar with the tax structure. Furthermore, customers no longer have to bear the burden of multiple taxes as all taxes are subsumed under one single rate.