In India, the iPhone has gained significant popularity despite its premium pricing. Consumers often have concerns about the Goods and Services Tax (GST) applied to iPhones, as it represents a considerable portion of the overall cost. This article will clarify the applicable GST rates on iPhones, discuss the types of GST involved, explain input tax credit eligibility, and detail the import duties levied on these devices. For further information on GST concerning mobile phones, you can refer to our article here.

GST on iPhones in India

Prior to the introduction of GST, various central and state taxes like Customs duty, Central Excise, and VAT were imposed at different stages of production. Even after GST implementation, Customs Duty continues to be applied to iPhones imported into India, primarily from countries such as China. The substantial indirect taxes, including both Customs Duty and GST, contribute significantly to the high retail price of iPhones in the Indian market.

GST Rate Applicable to iPhones in India

According to GST legislation, mobile phones are subject to an 18% GST rate, which also applies to iPhones. These devices are classified under HSN code 8517. When an iPhone is purchased from a dealer within the same state or Union Territory, the consumer is charged 9% Central GST (CGST) and 9% State GST (SGST) concurrently. If the purchase occurs from a dealer in a different state or Union Territory, a unified 18% Integrated GST (IGST) is applied. This 18% IGST rate also applies to iPhones imported into India, in addition to relevant customs duties. The example below illustrates how GST is levied on iPhones:

As illustrated by the example, the 18% GST rate on iPhones results in a higher final price compared to the pre-GST era.

GST on Refurbished iPhones

Given the high cost of new iPhones in India, many consumers opt for refurbished models. These are essentially used phones that a third party acquires, repairs, inspects, and restores to a near-new condition. In such scenarios, Rule 32(5) of the CGST Rules is applicable:

“Where a taxable supply is provided by a person dealing in the buying and selling of second-hand goods, i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply will be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored.”

This means that the value for GST calculation is the margin—the difference between the selling and purchase prices—provided that no input tax credit was claimed on the original purchase of the goods. For instance, if XYZ Ltd., a company trading in refurbished electronics, buys an iPhone 11 for Rs.19,000 from Ms. A and resells it to Mr. B for Rs.31,000 after refurbishment, GST at 18% will only be applied to the Rs.12,000 difference.

Input Tax Credit for iPhones

A common inquiry among iPhone users in India is whether they can claim Goods and Services Tax (GST) paid on their device. The simple answer is yes, but only if the iPhone is acquired and utilized for legitimate business purposes. To be eligible for input tax credit (ITC) on an iPhone purchase, the tax invoice must include the seller's company name, GSTIN, HSN code, the GST amount charged, and the buyer's name, GSTIN, and address. Furthermore, it is essential that the buyer has received the iPhone, and the seller has submitted their GST returns and remitted the tax dues to the government. The GST amount paid must also appear as ITC in the GSTR-2B statement.

It is crucial to note that an iPhone purchase falls under the definition of capital goods under the CGST Act when used for business. If the GST component of the purchase price is capitalized, ITC cannot be claimed, although depreciation can be applied to the full value. Conversely, if the GST portion is not capitalized, ITC can be claimed, subject to the aforementioned conditions. Additionally, the ITC reversal rules for capital goods, as outlined in the CGST Act, will apply if the iPhone is sold before the stipulated period ends.

GST on Composite Supply of iPhones and Accessories

Under GST, a composite supply involves two or more goods or services that are naturally bundled and supplied together in the usual course of business. An iPhone sold with its charger is a prime example. In such cases, the iPhone is considered the principal supply, and its GST rate determines the tax levied on the entire invoice. In contrast, items like earphones, which are not naturally bundled with the iPhone, are categorized as mixed supplies. These attract the highest GST rate applicable to any component within the mixed supply. Coincidentally, earphones are also subject to an 18% GST.

Import Duties on iPhones

iPhones brought into India incur a basic customs duty (BCD) of 20%. Additionally, a social welfare surcharge of 10% is levied on this BCD rate, as re-introduced in the Union Budget 2020. These duties are imposed on all imported mobile phones in India, with the aim of making them significantly more costly than domestically manufactured alternatives. Therefore, as demonstrated in the earlier example, the value of goods used for calculating IGST includes the assessable value of the goods plus basic customs duty and any other duties applicable under current laws. Consequently, Indian iPhone purchasers face a total of approximately 22% in duties and an 18% GST on their acquisition. These substantial indirect taxes contribute to iPhones being more expensive in India compared to many other nations.