Everything you need to know about GST on mobile phones before buying it

The Goods and Services Tax (GST) came into effect in 2017, and since then, it has been one of the essential parts of the Indian taxation system. Nowadays, GST is calculated for every purchase you make. There are various products for which you will need to pay GST. You must also pay GST on mobile phones when you’re purchasing them. Well, now that is having a huge impact. 

What is the mobile GST rate? 

There has been a change in the mobile GST rate compared to the last time. Till April 1, 2020, the GST on mobiles was 12%, but later it was revised to 18%. The revision for the rate was made at the 39th GST Council Meeting. With the implementation of this change, the mobile GST rates became the same everywhere. Hence, no matter which state you purchased the mobile from, you had to pay the same rate. 

GST isn’t like VAT. The VAT rates on mobiles used to differ from state to state. However, GST on mobile phones remains the same everywhere. GST played an important role in reducing the effect of tax-on-tax, thereby proving to be helpful in the long run. 

GST Rate Applicability on Mobiles

GST has proven to be an efficient transformation tool, especially for the Indian economy. They integrate all the commodities within the same tax transformation. Whether feature phones or smartphones, GST is levied on almost all mobile phones. 

Now we come to the question of composite supply. The composite supply has two or more items or services that are included and sold concerning the businesses. Therefore, you wouldn’t get the benefit of purchasing these goods separately. From the foods, only one item is considered the primary supply on which GST is calculated while creating invoices. For example, mobiles are sold with chargers and USB cables, both of which are essential requirements of a mobile phone. Therefore, the GST rate on mobiles will also apply to the charger and USB cable. 

What is the impact of GST on Exchange and Discount Offers?

Various dealers offer various exchange offers and discounts on mobiles. You can understand the impact of GST on mobiles on discount and exchange offers. 

Exchange Offers

We all know what exchange offers are- where one trades their older phones for the new ones. Customers can get a new handset in exchange for their old one and pay the difference between the cost of the new device and the resale value of the older device. When there was VAT, the difference sum would not be taxed. 

Ever since GST on mobiles got implemented, the exchange offers for mobile phones have become pretty simple. However, you will need to pay taxes on the reduced price too. 

Promotional Discount

Promotional discounts during festive and sale seasons are important in the smartphone industry. When calculating the payable taxes, the discounts will not be calculated for the GST regime. Nonetheless, this will only be valuable when the discounts are a part of the invoice. The GST implementation has therefore played an important role in bringing uniformity across the Maximum Retail Price for all the products. 

When the government introduced VAT, the mobile tax rate tended to differ from state to state. Hence, specific states used to charge less tax than others. Although you will need to pay a little higher price for GST, the uniformity of MRP plays a vital role in lowering the fluctuating tax rates. Therefore, every individual will need to pay the same tax rate. 

What is the effect of GST on mobiles and accessories? 

GST has a wide range of effects on mobiles and accessories. If you are purchasing any of these, you must be familiar with the impact to avoid the higher price risk. 

Some of the common effects of the GST on mobile phones and accessories include the following:

Taxed Interchange offers

Since GST on mobile phones was implemented with the same taxation rate, various phone makers have introduced new exchange offers. Therefore, users can buy new phones in exchange for their old ones. 

Better Indirect Tax System

The new taxation system allows individual taxpayers to go for lower tax rates. Therefore, this is highly beneficial for the exemptions and deductions which are a part of the new system. Furthermore, when purchasing phones, you can calculate the dividend income yourself. 

End-of-price benefits

The price used to vary across different retail stores before the introduction of GST. Since VAT was there, people could purchase phones from specific shops at a lower rate than others. Nonetheless, since the enforcement of GST on mobiles, the gap has changed, and the price of smartphones countrywide remains the same. The absence of this gap further leads to the end of all major price benefits for individuals. 

Did the smartphone dealers get any benefits? 

Smartphone dealers get a wide range of benefits, with GST implementation being the same countrywide. The introduction has helped to streamline the business and simplify it significantly. Some of the common benefits that smartphone dealers get include the following:

Increase in sales

Since mobiles are no less than a necessity, almost everyone buys them. With tax rates being the same everywhere, sales are increasing. The dealers and merchants registered for GST eventually benefit from a maximum number of sales. 

Better competition

Healthy competition is everywhere. The prices of mobile phones have become consistent countrywide. Therefore, there is healthy competition among mobile sellers.

Conclusion

Compared to VAT, GST has a simpler tax structure and can contribute to different sectors of the economy. The effort for transition has been made to simplify. Not only does it help lower inventory costs, but it also plays a vital role in reaping all the benefits countrywide. If you are confused about the GST on mobile phones, you must reach out to professionals like Piramal Finance. The team of experts will help you understand how GST works and how much tax you will need to pay. Furthermore, for any tax clarification, you can always reach out to them.