Mobile phones will attract an 18% goods and services tax (GST) rate from April 1, 2020, up from existing 12%, after the GST Council corrected the inverted duty structure that was being faced by the industry. The Council, however, deferred rationalizing the tax structure of fertilizers, man-made yarn, fibre and footwear, to the next meeting.
"Mobile phones and specified parts to attract 18% versus 12%. All other items, if there's a need to calibrate the rates, to remove the inversion, we can take them up in future, the examination of that can happen at a later time," said finance minister Nirmala Sitharaman after the conclusion of the 39th GST Council meeting on Saturday.
GST for maintenance, repair and overhaul service providers in India has been lowered to 5% from 18% now, with the provision of availing full input tax credit (ITC). “This will assist in setting up of MRO services in the country,” the finance minister added. GST rate on handmade and machine-made matchsticks was also rationalised to 12% from the present range of 5% and 18%.
“Increase of GST rate on mobile phones to 18%, arguably to correct the inverted duty structure, may lead to increase in prices,” said Pratik Jain, Partner and Leader Indirect Tax, PwC India.
“Given the current economic scenario, perhaps an option to provide a quicker refund of input tax credit (including on input services which is not allowed currently) could have been explored,” he added.