GST on mobile phones: Can GST be claimed on Mobile phones?
Can GST Be Claimed On Mobile Phones?
Yes, GST on Mobile phones can be claimed under certain conditions. But before talking about who can claim and how to claim, let us read through a few basic terminologies for a better understanding of the topic.
What is GST?
The Goods and Services Tax (GST) is an indirect tax that has replaced all central and state taxes in India such as the excise duty, VAT, services tax, etc. GST is levied on value addition at each stage and not based on the gross value of the goods or services billed at each stage.
The taxes paid at each stage will be credited in the next stage of value addition. Thus, the Goods and Services Tax charged by the seller or service provider (final dealer) is the final tax borne by the customer.
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What is an input tax credit in GST?
Input Tax credit (ITC) means the taxes paid at the time of purchase will be adjusted with the amount of output tax (sales tax) and balance liability of tax (sales tax minus purchase tax) has to be paid to the government. In simple words, when you buy a product/service from a registered dealer you pay taxes on the purchase. On selling it to consumers, you collect the tax.
John supplies goods to Bose and he collects Rs 3,000 from Bose against GST and pays the same to the government. Bose further sells the goods to Carl and he collects Rs 6000 as GST from Carl.
Since Bose had paid GST on inputs, he can claim an input tax credit of an amount equal to the GST paid on the inputs i.e. Rs 3,000. The balance of Rs 3,000 is paid to the Govt. by Bose. Lastly, Carl, the final consumer pays GST of Rs 6000 to Bose.
This shows that the tax that each of them has paid can be set off against their respective tax liabilities on output. This helps in the removal of the cascading effect of taxes that existed in the former indirect tax system.
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Who can claim ITC?
A person who has registered under GST can claim input Tax Credit only if the following conditions are met. And yes, the mobile phones/ laptops would be covered under the ITC as they are used in the furtherance of business.
- The phone should be purchased for business purposes
- The dealer should provide a tax invoice with their company name, address, GST number, HSN number of the phone, GST tax rate, and GST amount charged along with the buyer’s company name, address, GST number
- The said mobile device has been received
- GST returns filed by supplier
- The supplier has paid the tax charged to the government
- In case the mobile phone has been purchased in installments ITC can be claimed only when the last lot is received
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How to claim ITC?
All the taxpayers must file the amount of input tax credit in their monthly GST returns of Form GSTR-3B. The below table shows the summary figure of eligible ITC, Ineligible ITC, and ITC reversed during the tax period.
|Details||Integrated Tax (IT)||Central Tax (CT)||State or UT Tax||Cess|
|(A) ITC available (full or part)|
|(1) Import of Goods|
|(2) Import of Services|
|(3) Inward supplies|
|(4) Inward supplies from ISD|
|(5) All other ITC|
|(B) ITC reversed|
|(1) According to 42 & 43 of CGST Rules|
|(C) Net ITC Accessible (A) – (B)|
|(D) Ineligible ITC|
|(1) As per section 17(5)|
Currently, the GST rate on any mobile phone is 18% and the HSN code is 8517. Before GST was introduced, excise and VAT were charged on mobile phones wherein the VAT rates varied from state to state, so it was difficult to set a uniform price for the mobile phones. After GST came into the picture, it was easy to set a uniform price for a mobile phone as the tax rate is the same across the country. This helped in removing the cascading effect on taxes.
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|Type of Product||GST rate|
|Parts for the manufacture of phone||18%|
|Telephone sets (landline phones)||18%|
|Mobile phone Battery||18%|
|Screen Protector (Tempered Glass/Plastic)||18%|
Step by step guide to filing Form ITC-01?
GST Form ITC-01 is a declaration form filed on the GST portal. This particular form is used to claim the input tax credit by taxpayers registered under GST. Without filing Form ITC-01, it is impossible to claim the input tax credit.
As per Section 18(1) of the CGST Act 2017, the input tax credit can be claimed by filing form GST ITC-01 for inputs held in stock, finished goods, semi-finished goods, or capital goods on the cut-off date.
The declaration form ITC 01 should be filed within 30 days of the date of registration or migration to a regular scheme. For inputs, ITC can be claimed for invoices up to one year old. For capital goods it is five years.
Chartered Accountant certificate or Cost Accountant certificate must be shown if the ITC claim is more than INR 2 lakhs.
Follow the below steps to file a claim of ITC under Section 18(1)(a) in Form ITC-01.
Step 1: Sign in to GST Portal
Step 2: Enter the Username and Password
Step 3: Click ITC Forms under “Services” tab > “Returns” tab
Step 4: Under GST Form ITC-01, click the ‘Prepare online’ or ‘Prepare offline’ button.
Step 5: Select ‘Prepare online’ or ‘Prepare offline’ button and fill in the required details.
Step 6: Select the appropriate category under the ‘Claim Made Under’ list.
Step 7: Enter supplier GSTIN
Step 8: Enter supplier Invoice Number
Step 9: Enter Invoice Date
The taxpayer has to select the date when the invoice was generated and the Invoice date should be prior to the grant of approval.
Step 10: Select the type of Goods as necessary for the taxpayers filing Form ITC – 01 to maintain a detailed stock register with records of procurement and consumption of inputs.
Step 11: Enter the Description of Goods Inputs
Step 12: Select Unit Quantity Code (UQC)
Step 13: Enter the Quantity
Step 14: Enter the Invoice Value as adjusted by debit note/ credit note
Step 15: Enter the Amount of Input Tax Credit claimed
Enter the Amount of Input Tax Credit claimed as the Central Tax, State/UT Tax, Integrated Tax, and Cess.
Step 16: Click Add or Save button
In case multiple invoices are to be added, click the ‘Add’ button or to submit the invoice, click on the ‘Save’ button.
Step 17: Once the invoices have been added, click Preview > Submit > Proceed
The preview shows the draft copy of the form. No modification will be allowed after submission or after you click on Proceed.
Step 18: Refresh the Page
The status of GST ITC-01 changes to Submitted as soon the page is refreshed.
The effect of GST on the price of mobile phones
The below table depicts the prices before levying GST on mobile phones as compared to the levy under the GST system:
|Particulars||Pre- GST||Post- GST|
|Cost of manufacturing (a)||8,000||8,000|
|Excise duty @1% (b)||80||–|
|Base value for VAT counting (c)||8,080||8,000|
|VAT @14%/GST @ 18% (d)||1,131||1,440|
|Sale price quoted by manufacturer to retailer (e)= (a)+(b)+(c)+(d)||9,211||9,400|
|Value addition/packing charges (f)||500||500|
|Total value (g)= (c)+(f)||8,580||8,500|
|VAT @ 14%/GST @18% on above value (h)||70 (1,201-1,131)||90 (1,530-1,440)|
Generally, mobile phones are supplied along with the charger and USB cable (the accessories that come along with mobile phones are the composite supply under GST) which is essential for using the handset. The composite supply is naturally bundled and supplied with each other and cannot be supplied separately. Hence, the GST rate is not only applicable to mobile phones but also to the charger and USB cable. Sometimes, the earphones are also sold along with the phone, which is not bundled and is classified as mixed supplies.
How did GST on mobile phones benefit the dealers?
It’s no secret mobile phones have become an important part of our lifestyle in this generation. The craze and necessity of mobile phones are increasing day by day, even if the GST rate has increased to 18%.
Under the VAT regime, excise and VAT were charged on mobile phones, and the VAT rates vary from state to state. Therefore a uniform price for mobile phones could not be set. After the introduction of GST, it was easy to set a uniform price for a mobile phone as the tax rate is the same across the country. Hence, GST has helped in removing the cascading of tax rates. Ultimately, the rise of competition among mobile phone dealers has also increased.
Under the VAT regime, the online dealers benefited as they bought mobile phones from states with lower tax rates and sold them in states where VAT was higher.
The taxation system has become simple and easy after GST implementation.
Value of supply under GST
The value of supply is defined as the amount of money that the seller collects from the buyer to sell goods or services.
Value of supply in the case of exchange offers – the customers can get new mobile phones in exchange for old ones. The customer has to pay only the differential sum. Under the VAT regime, this differential sum was not taxable. Under the GST regime, barter is included in the value of supply. Thus the reduced sum is also taken into account and is taxable.
For example, The price of a new phone is Rs.50,000 under the exchange offer category. Actual price of the new phone without exchange is Rs.55,000. The original price of the phone Rs.55,000 will be considered for GST.
Value of supply in the case of Discounts – In case the customer has purchased the mobile phone on discount offer, it is possible to deduct from transaction value at the time of the sale and GST will not be levied on the same. But the following conditions are to be met.
- Discounts are filed in the invoices
- As per the credit note, ITC should be reversed on the discount received by the buyer.
Even though GST has an impact on the value of supply, it has made the tax system simple, hassle-free and also has helped in removing the cascading of taxes.