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What was the logic of raising GST on mobile phones from 12% to 18%?

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Jinesh

I work hard for my future.

23 Points Posted on 11 November 2020

Hello everyone,,

There may be parts on which 18% is levied but what is the fundamental problem if the final product attracts 12% GST instead of 18% GST? Was this increase done just for convenience? Why does every part in the supply chain need to have the same rate of GST?

Replies (5)

Quick Summary

The GST on mobile phones was raised from 12% to 18% primarily to address an 'inverted duty structure'. Previously, mobile phone components were taxed at 18%, while the final product was taxed at 12%. This rate difference led to significant accumulated Input Tax Credit (ITC) refunds, blocking working capital for suppliers. The increase aims to resolve this refund issue and streamline the tax process.

Guest

It was probably to reduce the refund on account of inverted tax rate structure

Shivam RC

Student

23693 Points Posted on 11 November 2020

It was due to the Inverted Duty Structure. The components of Mobile Phones were taxed at 18% whereas the final product - Mobile Phones were taxed at a lower rate of 12%. So a huge amount of ITC was getting accumulated due to this Rate difference. This is called "Inverted Duty Structure". The Suppliers were required to claim for Refund, which is a tedious and time consuming process. Due to this reason a huge amount of Working Capital was getting BLOCKED.

Therefore to remove this Refund issue, the GST Council increased the GST Rate on Mobile Phones from 12% to 18%.

ayusmita

Tax consultant

5895 Points Posted on 12 November 2020

A product is mixed of many tiny tiny products
when we mixed all it becomes a final product
and as India is not the hub of many manufacturing products we have it from outside and hence the tax increase to maintain a stustainbility and when it becomes final we decrease the tax so that it maintains a balance ..

Jinesh

I work hard for my future.

23 Points Posted on 12 November 2020

Originally posted by : Jinesh
	Hello everyone,, There may be parts on which 18% is levied but what is the fundamental problem if the final product attracts 12% GST instead of 18% GST? Was this increase done just for convenience? Why does every part in the supply chain need to have the same rate of GST https://speedtest.vet/?