Smartphones, medical devices to cost less with GST

In a bid to ensure that the benefits of lower GST on products such as smartphones and medical devices are handed over to the consumers, the government released on Monday calculations to show how the burden of indirect taxes will come down in the new regime.

The detailed analysis from the finance ministry comes days after the GST Council, comprising ministers from the Centre and states, decided on product-wise tax rates and the government threatened to invoke the anti-profiteering clause if the gains were not passed on from July, the scheduled date for GST launch. Some manufacturers, such as mobile phone and white goods companies, have suggested that prices may rise once GST kicks in although the government has repeatedly said that in most cases, not only is the burden lower but the advantage of input tax credit — or gains from refunds for taxes paid — will ensure that prices come down. In addition, several cesses and surcharges are going away.

In case of smartphones, the government countered the claim of handset manufacturers and said smartphones currently attracted 2% central excise duty, while VAT rates varied from state to state and was in the 5-15% range. "Weighted average VAT rate on smartphones works out to about 12%. Thus, the present total tax incidence on smart phones works out to more than 13.5%. As against this, the proposed GST rate for smart phones is 12%," an official statement said.