Before the implementation and enacting of GST law, VAT which is known as Value Added Tax was levied on the purchase of mobile phones, and VAT varied from state to state. After the enactment or implementation of the GST law, from the 1st of July, 2017. GST on mobile phones is levied uniformly across the whole country.
The GST rate for mobile phones was 12 percent and the HSN code is 8517 until the 1st of April 2020. Later, it was revised to 18 percent. The present GST rate applicable on mobile phones and mobile accessories is 18 percent under the HSN Code 8517 This revision of increasing the GST rate was made at the 39th meeting of the GST Council. With the GST surge and GST, tax collection is increasing beyond the specified threshold limit, and it is possible for mobile phones to become cheaper as GST rates are reduced.
According to the latest update of December 2021, Chennai India Cellular and Electronics Association (abbreviated as ICEA), has demanded to reduce the 12 percent Goods and Services Tax Rate on mobile phones and 5 percent on its parts and components.
GST rates on mobile phones and mobile accessories are determined under HSN Chapter 85. HSN Chapter 85 has different types of GST rate slabs which determine the applicability of different taxes on the purchases of mobile phones and mobile accessories. Thus it is highly mandatory to mark the appropriate or correct HSN code while purchasing the mobile phone to avoid wrong invoicing and extra charges.
States GST and Central GST rates are different for different items. As it is evident that both the central and state governments levy separate GST on items and goods for the generation of GST revenue, if a person buys a mobile phone as an end customer, then he or she has to pay 18 percent of GST on mobile phones.
But if a person will purchase the same mobile phone from a dealer or from an intermediary party then the 18 percent of GST would be divided into state GST and central GST equally. On the other hand, if the phone was purchased from a dealer out of a particular state, IGST or Integrated Goods and Services Tax would be 18 percent. IGST would be the same during the import of mobile phones.
The Union Budget 2020 has re-imposed social welfare surcharge on imported mobile handsets over and above 20 percent of basic customs duty. Earlier, mobile phones were exempted from 10 percent of the social welfare surcharge. This social welfare surcharge has made mobile phones costlier than locally-made mobile phones.
Value of goods for calculating Integrated GST = Assessable Value of Goods + Basic Customs Duty + Any Other Duty chargeable on goods under any law during that time. This formula has increased the price of importing mobile phones and mobile accessories in India.
Implementation of GST law has brought uniformity in the realm of taxation in India. Under the VAT regime, mobile phones were taxed 5 percent along with 1 percent of excise duty. The tax rates were different in different states. But under the GST regime, 18 percent of GST on the purchasing of mobile phones is even and the same throughout the country. However, higher GST rates have made the prices of mobile phones a bit costlier but this has brought several benefits to smartphone dealers by making the taxation system seamless and hassle-free.
HSN Code or Harmonised System of Nomenclatur is an international uniform system which was introduced for the systematic classification of goods all over the world.
IGST or Integrated Goods and Services Tax is a type of tax under the GST regime that applies to all types of inter-state supplies of goods and/or services and will be governed by the IGST Act.