GST on iPhone: HSN Code and GST Rate on iPhone

Despite its price point, the iPhone has grown to be a very popular phone brand in India. However, iPhone buyers are always apprehensive about GST on iPhones as it forms a substantial part of the cost. In this article, we decode the GST rate on iPhone mobiles, the type of GST on iPhones, the input tax credit available, import duties on iPhones, and more.

For more information on GST on mobile phones, you can refer to our article here.

GST on iPhones

Before the implementation of GST, there were various taxes levied by the Central and state governments, such as Customs duty, Central Excise, and VAT, at various stages of value addition. Now, post the implementation of GST, there is still Customs Duty levied on iPhones as they are imported into India from countries like China.

In fact, the reason why iPhones are as expensive as they are is because of the amount of indirect taxes forming a part of the value, which at present, includes Customs duty and GST.

GST Rate on iPhones in India

Under the GST law, the rate applicable on mobile phones is 18%. Hence, the GST rate on iPhones is 18%. It falls under the HSN code 8517.

Note here that if the iPhone purchase is made from a dealer located in the same state/Union Territory, then the customer is charged CGST at 9% and SGST at 9%. If the purchase is made from a dealer in a different state/Union Territory, then the customer will have to pay IGST at 18% on the iPhone. The 18% IGST rate is also applicable on iPhones imported into India, in addition to various customs duties we have detailed in this article. 

Let’s understand better how GST is levied on iPhones with the help of an example.
 

As you can see from the example, due to the high GST rate on iPhones at 18%, the price is now higher as compared to the pre-GST era.

*VAT is assumed to be 14%. The rate varies with state/UT.

GST on Refurbished iPhones

Owing to the high cost of iPhones in India, many people opt to purchase refurbished iPhones. Refurbished phones are nothing but used phones, where a third party has purchased them and enhanced their value by making repairs, running checks and bringing them to an almost-new standard. In this case, Rule 32(5) of the CGST Rules will apply:

“Where a taxable supply is provided by a person dealing in the buying and selling of second-hand goods, i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply will be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.”

In simple words, the value of supply will be the margin, i.e. the difference between the purchase price and selling price, and GST will be payable on the same. However, no input tax credit should have been taken. 

For example, a company XYZ Ltd. deals in refurbished computers and mobile phones. They purchased an iPhone 11 from Ms A for Rs.19,000 and are selling the same to Mr B after refurbishing it at a value of Rs.31,000. GST will apply at the rate of 18% only on the differential value of Rs.12,000.

Input Tax Credit on iPhones

One of the biggest questions asked by iPhone users in India is – Can I claim GST on iPhones? The short answer is yes, provided they are used for business purposes and used in the furtherance of business.

An iPhone customer who is planning to avail of input tax credit on the purchase of an iPhone must ensure that the tax invoice contains the name of the seller company, the GSTIN, HSN code, GST amount charged, and the buyer’s name, GSTIN, and address. 

Further, it is important to note that as per the rules of claiming input tax credit, the iPhone mobile should have been received by the buyer, and the seller should have filed their GST returns and paid the tax dues to the government. The amount of GST paid must also be reflected as ITC in GSTR-2B.

It should be noted here that the purchase of an iPhone will fall under the definition of capital goods as per the CGST Act, as they are intended to be used in the course of furtherance of business. Hence, if the GST portion of the purchase price is also capitalised, then no ITC can be claimed. However, depreciation can be claimed on the entire value. 

If the GST portion is not capitalised, then ITC can be claimed to the extent of the GST paid, subject to the conditions listed above. Besides, the ITC reversal rules on capital goods will apply under the CGST Act if sold before the end of the prescribed period.

GST on Supply of iPhone and iPhone Accessories

Under GST, composite supply means the supply of two or more goods/services that are naturally bundled and supplied together in the ordinary course of business. A good example is an iPhone and iPhone charger. The iPhone, here, is a principal supply, and its GST rate is considered while raising the invoice. 

However, in the case of earphones which are not naturally bundled, they are classified as mixed supplies, attracting the highest rate of GST applicable to any product in the mixed supply. Here, earphones also happen to attract an 18% levy.

Duties on the Import of iPhones

iPhones imported into India are subjected to a basic customs duty (BCD) of 20%. Over and above, there is a social welfare surcharge applicable at the rate of 10% on this BCD rate, as re-imposed in Union Budget 2020. These duties apply to all mobile phones imported into India and are in a bid to make imported phones substantially more expensive than locally made ones.

Hence, as explained in the example above, 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 means that iPhone buyers in India have to pay 22% duty and 18% GST on the purchase of iPhones. The high rates of indirect taxes imposed in India make iPhones in India more expensive than in many other countries.