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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. This has increased the prices of mobile phones.
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:
|Particulars||Pre- GST||Post- GST|
|Cost of manufacturing (a)||8,000||8,000|
|Excise duty @1% (b)||80||–|
|Base value for VAT calculation (c)||8,080||8,000|
|VAT @14%/GST @ 18% (d)||1,131||1,440|
|Sale price quoted by manufacturer to retailer(e)= (a)+(b)+(c)+(d)||9,211||9,440|
|Value addition/packing charges (f)||500||500|
|Total value (g)= (c)+(f)||8,580||8,500|
|VAT @ 14%/GST @18% on above value (h)||70(1,201-1,131)||90(1,530-1,440)|
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.
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.
For example: 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 this case, the mobile phones are 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.
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, given below as follows:
|Product name||HSN code||GST rate|
|Lithium-ion batteries||8507 60 00||18%|
|Speakers, headphones, earphones||8518||18%|
|Plastic screen protector||3919||18%|
|Tempered glass screen protector||7007||18%|
|Parts for the manufacture of Telephones for cellular networks or for other wireless networks||85||12%|
Earlier, the mobile phones were exempted from 10% social welfare surcharge. But the Union Budget 2020 has 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.
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.
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.
(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.