Decoding GST on Mobile Phones: How Much Should You Expect to Pay?
The Indian government implemented the Goods and Services Tax (GST) regime in 2017, bringing multiple indirect taxes under a single umbrella. While the GST has simplified the taxation process, it has also caused confusion regarding the tax rates applicable to different products. Mobile phones are one such category that has undergone multiple changes in GST rates since the implementation. In this article, we will decode the GST on mobile phones and discuss how much you should expect to pay.
GST Rates on Mobile Phones
Initially, mobile phones were taxed at 12% under the GST regime. However, in July 2018, the GST Council reduced the tax rate to 5%. This decision was taken to boost the mobile phone industry, which had been facing a decline in sales due to high tax rates.
In addition to the general 5% GST rate, mobile phones also attract another levy called the compensation cess. This cess was introduced by the government to compensate the states for any revenue loss due to the implementation of the GST. The compensation cess varies based on the value of the phone.
For phones with a retail price below Rs. 1,000, there is no compensation cess. For phones priced between Rs. 1,000 and Rs. 2,500, the compensation cess is 1%. For phones priced between Rs. 2,500 and Rs. 5,000, the cess is 2%. For phones priced between Rs. 5,000 and Rs. 7,500, the cess is 4%. For phones priced between Rs. 7,500 and Rs. 10,000, the cess is 6%. For phones priced above Rs. 10,000, the cess is 12%.
Impact on Consumer Cost
To understand how much GST and compensation cess you would have to pay on a mobile phone, let us take an example. Suppose you purchase a phone worth Rs. 15,000. Here’s how the tax computation will look:
– 5% GST on Rs. 15,000 = Rs. 750
– 12% compensation cess on Rs. 10,000 (since the phone price exceeds Rs. 10,000) = Rs. 1,200
Therefore, the total tax applicable on the phone will be Rs. 1,950 (Rs. 750 + Rs. 1,200). This amount will be added to the actual cost of the phone, making the final price Rs. 16,950.
It is important to note that not all retailers include the GST and compensation cess separately in the bill. Some retailers may incorporate these taxes into the phone price itself, making it difficult to distinguish between the actual cost and the taxes paid.
Conclusion
The GST and compensation cess on mobile phones may seem confusing, but the rates are relatively straightforward. Thanks to the GST Council’s decision to reduce the GST rate to 5%, customers can now enjoy cheaper mobile phones. However, the compensation cess can still impact the phone’s total cost, especially for expensive models. It is always beneficial to check the taxes applicable on a mobile phone before making a purchase. While the GST may have its pros and cons, it has undoubtedly eased the taxation process for both businesses and consumers.
