GST on mobile accessories
The 39th GST Council meeting raised the GST rate on mobile accessories from 12% to 18% with effect from 1 April 2020. This has enhanced the prices of mobile phones.
I do not need to expand on the importance of mobile phones in our lives, everyone is well aware of how much we need a mobile phone. India has the second-highest mobile market in the world.
Various types of mobile phones, smartphones, and mobile accessories are sold in India through micro, small and medium enterprises (MSMEs). Coming straight to the point, today’s writing is about GST rates for mobile phones, smartphones, chargers, and mobile accessories and the HSN code.
Applied GST Rates on Mobile Accessories
Before the introduction of the Goods and Sales Tax (GST) in India, value-added tax (VAT) was levied on purchases of all companies, including mobile phones. VAT rates for mobile phones vary from state to state. Under the GST rules, the tax rate for mobile phones is the same across the country. Currently, the price of mobile phones is likely to go down as the GST tax has been reduced. The GST rates for mobile phones are 18% and the HSN code is 8517.
When is SGST & CGST or IGST used?
As mentioned, 18% GST is payable by the customer when purchasing mobile phones. If the consumer purchases the phone from the dealer within the state premises, 18% will be divided equally into SGST (State GST) and CGST (Federal GST). Conversely, if the customer receives a phone call from a dealer in another state, 18% IGST will apply. This means that mobile phone imports (from one state to another) face 18% IGST.
Importance of HSN code under GST for mobile accessories
GST rates on mobile accessories for mobile phones are determined under HSN Chapter 85. HSN Chapter consists of 85 various GST rate layers. According to which GST rates apply to the purchase of mobile phones. It is therefore mandatory to specify the correct HSN code to prevent incorrect invoicing and surcharges.
How did the cost of mobile accessories change due to GST?
Before GST, excise and VAT were levied on mobile phones. VAT rates vary from state to state, so it is difficult to set a consistent price for a mobile phone. Under GST, the tax rate is the same across the country so that a uniform price can be fixed for a mobile phone. Currently, the GST rate for mobile phones is 18%.
The implementation of the GST has reduced the price of the mobile phone in the above case as it removes the tax on the tax.
GST applies to mobile phones
GST has served as a major transformation tool for the Indian economy by bringing all goods and services under a single tax system. Applies to all mobile phones such as smartphones or feature phones without GST exemption.
Nature of Mixed Distribution: Under GST, hybrid supply is a distribution consisting of two or more products/services that are naturally integrated and delivered in the normal course of business. Such items cannot be provided separately. One of which is the main supply and its GST rate is considered when raising the invoice.
In this case, mobile phones are usually provided with a charger and a USB cable, which is essential for using a cell phone. Therefore, the GST rate applicable to mobile phones is also applicable to chargers and USB cables.
However, in a few brands, earphones are sold with the phone, which is not naturally packaged and is classified as a composite product.
What is the value of distribution to calculate GST on mobile phones?
Value of supply: Under GST, the value of the supply is the money the seller collects from the buyer to sell goods or services. In the case of the concerned parties, GST is levied on the transaction value. Transaction value is the value at which parties transact in the normal course of business.
Transfer Offers: Dealers of smartphones often come up with transfer offers so that customers can get new handsets to replace the old handsets and they have to pay a different amount. This reduced amount is not taxable under the VAT regime. But, under GST, it is included in the definition of barter supply, thus taxing even the reduced price.
Discounts Exemption: Trade discounts, quantity discounts are part of normal trading and trading. Thus, the discounts recorded in the invoice are excluded when determining the taxable value. Discounts are excluded from determining the taxable value if the following two conditions are met:
- Discounts are reflected in the relevant invoices.
- ITC should be replaced at the discount received as per the credit note.