Understanding Goods and Services Tax on Mobile Phones in India

Indian mobile phones incur an 18% Goods and Services Tax, increasing their overall cost. The 56th GST Council meeting in September 2025 confirmed that this rate remains unchanged. Additionally, increased import duties on phone components are contributing to higher prices. This article will examine the GST rate, rules for accessories, import effects, and eligibility for input tax credit.

Recent Policy Updates

The 56th GST Council meeting, held on September 3, 2025, reaffirmed the GST rate structure changes taking effect from September 22, 2025. While many consumer electronics, like air conditioners and televisions, saw their GST rates reduced from 28% to 18%, the GST rate on mobile phones remains constant at 18%. Mobile phones have not received any GST rate reduction under these recent reforms. However, a rise in import duties on mobile phones and their parts may lead to higher overall prices, even with a stable GST rate.

Mobile Phone GST Rate

Before GST, smartphone prices were inconsistent due to varying state taxes. Now, a uniform 18% rate is applied nationwide, with HSN code 8517.

GST rates for mobile phones and accessories fall under HSN Chapter 85. Below are the rates for specific products:

| Product Name | GST Rate | HSN Code | ||---|---|---| | Mobile phones | 18% | 8517 | | Lithium-ion batteries | 18% | 8507 60 00 | | Power bank | 18% | 8507 | | Memory card | 18% | 8523 | | Speakers, headphones, earphones | 18% | 8518 | | Plastic screen protector | 18% | 3919 | | Tempered glass screen protector | 18% | 7007 | | Parts for manufacturing cellular phones or other wireless networks | 12% | 85 |

Impact of GST on Mobile Phone Pricing

Prior to GST, mobile phones were subject to excise duty and VAT, with VAT rates differing across states, preventing uniform pricing. GST introduced a nationwide uniform tax rate, enabling consistent pricing. Currently, the GST rate on mobile phones is 18%.

The table below illustrates the pricing before and after GST implementation:

| Particulars | Pre-GST | Post-GST | ||---|---|---| | Cost of manufacturing (a) | 8,000 | 8,000 | | Excise duty @1% (b) | 80 | – | | Base value for VAT calculation (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 | 9,440 | | Value addition/packing charges (f) | 500 | 500 | | Total value (g)= (c)+(f) | 8,580 | 8,500 | | VAT @ 14%/GST @18% on above (f) value | 70(1,201-1,131) | 90(1,530-1,440) | | Total price | 8,650 | 8,590 |

GST implementation has, in this scenario, reduced the mobile phone price by removing the cascading effect of taxes.

Types of GST Applicable to Mobile Phones

The Goods and Services Tax has significantly transformed the Indian economy by unifying various goods and services under a single tax system. GST applies to all mobile phones, including smartphones and feature phones, without any exemptions.

Inter and Intra-State Tax Application (SGST, CGST, IGST)

If a customer buys a mobile phone from a dealer within the same state or Union Territory, they will pay 9% CGST and 9% SGST. However, if the purchase is made from a dealer in a different state or Union Territory (e.g., an e-commerce vendor), an 18% IGST will be applied.

Understanding Composite Supply

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. These items cannot be provided separately, and one is identified as the principal supply, dictating the applicable GST rate for invoicing. For mobile phones, a charger and USB cable are typically supplied alongside the handset, as they are essential for its use. Consequently, the GST rate for the mobile phone also applies to these accompanying accessories.

Nevertheless, if earphones are bundled with the phone by some brands, this is not considered a natural bundling and is categorized as mixed supplies.

Determining the Value of Supply for Mobile Phone GST Calculation

1. Value of Supply: Under GST, the value of supply represents the amount a seller collects from a buyer for goods or services. For transactions between related parties, GST is calculated based on the transaction value, which is the price at which unrelated parties would conduct business under normal circumstances.
2. Exchange Offers: Smartphone dealers frequently offer exchange programs where customers trade old phones for new ones, paying only the difference. While this reduced amount was not taxable under the VAT regime, GST includes barter in the definition of supply, making even the reduced price subject to tax. For instance, if a new phone is sold for Rs.20,000 with an old phone exchange, but its price without exchange is Rs.25,000, GST will be charged on Rs.25,000.
3. Exclusion of Discounts: Trade and quantity discounts are standard in commerce. Therefore, discounts recorded on an invoice are excluded when determining the taxable value, provided two conditions are met:
   • The discounts are clearly stated in the relevant invoices.
   • Input Tax Credit (ITC) must be reversed on the received discount as per the credit note.

GST on Imported Mobile Phones

In Budget 2024, there was a proposal to reduce the Basic Custom Duty (BCD) on mobile phones, chargers, and PCBAs from 20% to 15%.

Previously, Budget 2023 had eliminated import duty on camera lenses and various parts used in their manufacture, including cellular mobile phone camera modules. Before this, a 2.5% customs duty was imposed. Furthermore, the duty exemption for importing lithium-ion cells for cellular mobile phone batteries or battery packs was extended until March 31, 2024.

Before Budget 2020, mobile phones were exempt from a 10% social welfare surcharge. However, the Union Budget 2020 reinstated this surcharge on imported mobile handsets, in addition to the existing 20% basic customs duty, making imported phones more expensive than domestically produced ones.

IGST is applied to the value calculated after adding customs duty for all mobile phone imports. Therefore, the value of goods for IGST calculation includes the assessable value of goods, basic customs duty, and any other duties applicable under current laws. This has resulted in higher prices for importing mobile phones into India.

Input Tax Credit (ITC) Eligibility for Mobile Phones

Input tax credit (ITC) can be claimed on mobile phones if the device is purchased for business purposes and used to further business activities.

Additionally, the tax invoice must include the company's name, address, GSTIN, HSN code, and the GST amount charged, along with the buyer company’s name, address, and GSTIN.

It is crucial to adhere to other ITC claim rules, such as ensuring the mobile device has been received by the recipient, and the supplier has filed their GST returns and remitted the tax to the government.

GST's Influence on Mobile Phone Prices, Benefits, and Challenges

GST has standardized product prices nationwide. Under the VAT regime, mobile phones were taxed at 5% plus 1% excise duty, with rates as high as 14% in some states like Gujarat. This led consumers to seek dealers in lower-tax states.

With GST, a consistent 18% tax applies across the country. Although this higher rate has made mobile phones slightly more expensive, it offers the advantage of eliminating the cascading effect of taxes.

Advantages for Smartphone Dealers

1. Increased Sales: In the current era, mobile phones are considered a necessity. Sales for mobile phone dealers with GST registration are steadily growing.
2. Enhanced Competition: Uniform prices due to standardized tax rates across the nation foster healthy competition among mobile phone dealers.
3. Reduced Online Advantages: Under the VAT system, e-commerce retailers could buy phones from states with lower tax rates and sell them in states with higher VAT. While online prices are still lower than retail store prices, the price difference has narrowed significantly.

GST implementation has simplified the taxation system and reduced complexities.