The Ministry of Finance recently commemorated the six-year anniversary of the Goods and Services Tax (GST) in India. As part of the celebration, the official social media accounts of the Ministry shared an image highlighting the advantages of GST compared to the previous taxation system, which involved multiple taxes and resulted in a higher cumulative value. The image showcased the disparity in tax values before and after the implementation of GST, shedding light on the benefits it brought, such as lower taxes on mobile phones, TVs, home appliances, and more.
However, it’s important to clarify a common misconception that arose from the timing of the Ministry’s post. Many online users, including influential social media personalities, misinterpreted the information and celebrated the reduction of GST on mobile phones. Unfortunately, this celebration was premature and misguided. The truth is that the GST on mobile phones in India has not been reduced.
When the GST was first implemented, the government established a 12 percent tax rate on mobile phones. However, after the 39th GST council meeting, the Government of India decided to increase the GST on mobile phones to 18 percent, effective from April 1, 2020. Consequently, smartphone companies have been paying up to 18 percent GST on mobile handsets, ultimately transferring this burden to the consumers.
During the Budget 2023, the government announced a reduction in GST on mobile phones, lowering it back to 12 percent. Nonetheless, consumers have yet to witness the benefits of this reduction, as the prices of components, logistics, and other factors remain unaffected due to external circumstances. Factors such as disruptions in the supply chain, the ongoing Russia-Ukraine conflict, and the fluctuating value of the Indian rupee against the US dollar have contributed to consumers paying more directly or indirectly. Even if the prices of phones have remained the same, they may not offer the same value in terms of hardware and features. On the other hand, phones featuring upgraded hardware compared to previous models have commanded significantly higher prices.
To summarize, the GST on mobile phones in India continues to be set at 12 percent and has not undergone any recent changes. However, the recent post by the Ministry of Finance comparing taxes before and after the introduction of GST seems to have misled several users, leading to the mistaken belief that the GST on mobile phones has been reduced. It is crucial to have accurate information to make informed decisions and avoid misunderstandings, particularly when it comes to matters of taxation and financial implications.