The Goods and Services Tax (GST) Council is likely to consider a proposal to increase GST on mobile phones to 18 per cent at its next meeting on March 14 to resolve the industry’s inverted duty structure, said one officials.
Mobile phones are currently charged at a GST rate of 12 percent, even though many parts that are used in cell phones fall under the GST rate of 18 percent. It creates a situation where the duty on inputs is higher than that on finished products. This leads to an inverted duty structure.
“The inverted duty issue on mobile phones has been brought up several times… it can be taken up this time,” said a senior official who did not want to be named.
If the GST council accepted the proposal, the rate increase would lead to an increase in mobile prices across categories. This move would be detrimental to the industry that requested a rate reduction on components to 12 percent in order to bring parity with fully-made mobile phones.
Any move to increase the rate on fully assembled phones will lead to worst effect on the industry, which is suffering in the midst of coronavirus outbreak and due to the difficulty of importing components from China.
The proposal is likely to be taken at the forthcoming meeting this Saturday, when the GST council is likely to decide on deferment of e-invoicing and QR code, along with exemption from e-invoicing to certain sections of the industry. The council is also likely to give some procedural relaxations, in addition to deferring the new return form which was to come into effect from April 1, another official said.
A third official said that proposals to correct the inverted duty structure in fabrics, ready-made clothing and even fertilizers could also be taken up. As even in these cases the tax rate on raw materials is higher at around 12 per cent whereas the finished goods are taxed at a rate of 5 per cent.