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What to Expect: GST Rate on Mobile Phones in 2022
As the year 2022 approaches, the Indian mobile phone industry is preparing for a change in the Goods and Services Tax (GST) rate applicable to their products. This article aims to inform you about what to expect regarding the GST rate on mobile phones in 2022, why it matters, and how it may affect you as a consumer or a business owner.
GST Background
To start with, let’s recap what GST is and how it works. GST is a value-added tax that replaced multiple indirect taxes such as excise duty, service tax, and VAT from July 1, 2017, in India. It is a destination-based tax, meaning that it is levied on the final consumption of goods and services, rather than their production or distribution. GST has four slabs of rates based on the category of goods and services: 5%, 12%, 18%, and 28%. Besides, some items such as alcohol, petroleum, and electricity are exempted or subject to separate state taxes.
GST on Mobile Phones
Mobile phones are classified under the 18% GST slab, which includes electronic products, such as cameras and speakers. This rate has been fixed since the implementation of GST and was reduced from the earlier tax rate of around 12-15% for smartphones. GST applies to both locally made and imported mobile phones, except for those imported under the Export Promotion Capital Goods (EPCG) scheme, which allows duty-free imports of capital goods for export production.
Changes Expected in 2022
The Union Budget 2021-22 introduced a new clause in the Customs Act, 1962, to enable the government to notify a special additional duty (SAD) on certain goods, including mobile phones, that have high import content. The SAD is proposed to be levied at 5% on imported mobile phones, in addition to the existing GST of 18%. This move aims to promote domestic manufacturing of mobile phones by making imports comparatively costlier and generating revenue for the government. Though the exact date of implementation of this new rule is not clear yet, it is likely to happen in 2022.
Impact on Consumers and Businesses
The increase in the overall tax burden on mobile phones due to the SAD may impact their prices in India. This could mean either a direct increase in the MRP or a reduction in the discounts or offers offered by retailers and e-commerce platforms. For example, a mobile phone priced at Rs. 20,000 currently attracts a GST of Rs. 3,600 (18% on Rs. 20,000) and no other duty. Once the SAD is implemented, the same phone would attract a combined duty of Rs. 4,600 (5% on Rs. 20,000 + 18% on Rs. 20,000), adding an extra burden of Rs. 1,000. Additionally, businesses importing or selling mobile phones may face compliance challenges, such as corrections in the invoices, filing of returns, and payment of taxes, which require more time and resources.
Conclusion
In conclusion, the GST rate on mobile phones in 2022 is likely to increase due to the proposed SAD that would be imposed on imported mobile phones, in addition to the existing 18% GST. The actual impact on prices and sales of mobile phones in India will depend on various factors such as the rate of domestic production, competition, and consumer behavior. It is essential for consumers and businesses to stay updated about the changes in the GST rates and comply with the tax laws to avoid any penalties. We hope this article provided you with valuable insights into what to expect regarding the GST rate on mobile phones in 2022 and why it matters.
