GST on Mobile Phones: Applicability, HSN Code and GST Rate

The rate of GST on mobile phones and accessories were increased to 18% from 12% with effect from 1st April 2020 at the 39th GST Council meeting. Budget 2023 also proposed an increase in import duty on the materials used in making of phones. Such measures increase the prices of mobile phones. In this article, we primarily explain the GST rate on mobile phones, GST on mobile accessories, import impact, whether we can claim GST on mobile phones as input tax credit, and more.

How did the price of mobile phones change due to GST?

Before GST, excise and VAT were charged on mobile phones. The VAT rates varied from state to state, so it was difficult to set a uniform price for the mobile phone. Under GST, the tax rate is the same across the country, and thus a uniform price can be set for a mobile phone. At present, the GST rate on mobile phones is 18%.

Let’s check out the prices before levying GST on mobile phones as compared to the levy under GST regime:

The implementation of GST has decreased the price of the mobile phone in the above case, due to the elimination of the tax-on-tax effect.

What is the GST rate on mobile phones?

Under the pre-GST regime, a smartphone’s price wasn’t fixed as taxes varied from state to state. But under GST, a uniform rate of 18% is charged across the county. The related HSN code is 8517.

GST rate on mobile phones and accessories is covered under HSN chapter 85. Let’s check out the Rates of GST on Mobile Phones and Accessories with HSN Code, given below as follows:

To find out the GST rate on other goods, you can use our easy GST rate finder.

GST on Mobile Phones – Types of GST Applicable

GST has served as a major transformation tool for the Indian economy by bringing all the goods and services under a single taxation system. GST is applicable on all mobile phones whether it is a smartphone or a feature phone, without exemption.

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

If Mr X purchases a mobile phone from a dealer located in the same state/Union Territory, he will have to pay CGST at 9% and SGST at 9%. If he purchases a mobile phone from a different state/Union Territory, he will have to pay IGST at 18%, e.g. an e-commerce vendor.

Nature of composite supply

Under GST, composite supply is a supply comprising two or more goods/services which are naturally bundled and supplied with each other in the ordinary course of business. Such items cannot be supplied separately. One of which is a principal supply, and its GST rate is considered while raising the invoice. In the case of mobile phones, a mobile phones is usually supplied along with the charger and USB cable, which is essential for using the handset. So, the GST rate that applies to the mobile phone will also apply to the charger and USB cable.

However, in a few brands, the earphones are also sold along with the phone, which is not naturally bundled and is classified as mixed supplies.

What is the value of supply to compute GST on mobile phones?

1. Value of supply: Under GST, the value of supply is the money that the seller collects from the buyer to sell goods or services. In the case of related parties, GST is charged on transaction value. Transaction value is the value at which unrelated parties would transact in the normal course of business.
2. Exchange offers: Dealers of smartphones often come up with exchange offers whereby the customers can get new handsets in exchange for old ones, and they just need to pay the differential sum. This reduced sum was not taxable under the VAT regime. But, under GST, barter is included in the definition of supply, and thus even the reduced price is taxable. 
   For example: Where a new phone is sold for Rs.20,000 in exchange for an old phone. The price of the new phone without exchange is Rs.25,000. In this case, GST will be charged on Rs.25,000.
3. Exclusion of discounts: Trade discounts, quantity discounts are a part of normal trade and commerce. Thus, discounts recorded on the invoice are excluded while determining the taxable value. Discounts are excluded from determining taxable value if the below two conditions are met:
   • Discounts are reflected in relevant invoices.
   • ITC should be reversed on the discount received as per credit note.

GST on import of mobile phones

*In Budget 2024, the Basic Custom Duty (BCD) on mobile phones, chargers and PCBA was proposed to be brought down from 20% to 15%. 

Earlier by the virtue of Budget 2023, the duty on import was reduced to nil for camera lens and various parts used in its manufacturing, including camera module of a cellular mobile phone. Before that, 2.5% customs duty was charged. Further, the duty exemption granted earlier was extended up to 31st March 2024 for the import of lithium-ion cell used in making batteries or battery packs of cellular mobile phone.

Prior to Budget 2020, the mobile phones were exempted from 10% social welfare surcharge. But the Union Budget 2020 re-imposed social welfare surcharge on imported mobile handsets over and above existing 20% basic customs duty, making them costlier than the locally made ones.

On the value arrived at after adding the customs duty, the IGST shall be charged for all the imports of mobile phones.

Therefore, the value of goods for calculating IGST = assessable value of goods + basic customs duty + any other duty chargeable on goods under any law for the time being in force. This has increased the price of importing mobile phones in India.
*This will come into force once notified by the CBIC.

Can ITC Be Claimed on Mobile Phones?

Input tax credit (ITC) can be claimed on mobile phones subject to certain conditions, primarily being that the mobile phone is purchased for business purposes and used in the furtherance of business.

Further, the tax invoice needs to have the name of the company, address, GSTIN, HSN code, GST amount charged, as well as the buyer company’s name, address, and GSTIN.

It is important to note that the other rules of claiming ITC apply, such as the mobile device has been received by the recipient, the supplier has filed their GST returns and paid the said tax to the government.

To find or verify the GST number of any company, you can use our GSTIN search tool.

How does GST impact mobile phone prices, benefits and unresolved issues?

The introduction of GST has brought uniformity in product prices all over the country. Under the VAT regime, mobile phones were taxed at 5% along with 1% excise duty. In some states like Gujarat, the tax rate was as high as 14%. Thus, anyone would purchase from selected dealers where the price was low.

But, under GST, 18% tax is charged all over the country. However, higher tax rates under GST has made the price of mobile phones a bit expensive yet with a benefit of removing cascading effect on taxes.

Benefits to the dealers of smartphones

(A) Increase in sales: In today’s’ generation, mobile phones have become a necessity. The sales of mobile phones are increasing day by day for the mobile phone dealers having GST registration.

(B) Increase in competition: The prices have become uniform due to standard tax rates across the nation. This promotes healthy competition among dealers of mobile phones.

(C) No more online benefits: Under the VAT regime, e-commerce players bought mobile phones from states with lower tax rates and sold in states where VAT was higher. Online prices are still lower than retail store prices. But, the gap has reduced.

The implementation of GST has made the taxation system simple and hassle-free.

Read more: GST on iPhone: HSN Code and GST Rate on iPhone

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