Explore Smart Ways to buy a Smartphone under GST


India is the fastest growing market for smartphones in the world. It relies on domestic manufacturers and imports to meet the growing demand. From July 1, 2017, the phone industry has witnessed a tectonic modification with the implementation of the Goods and Services Tax (GST).

Mobile phones to become cheaper

Under the new tax structure, mobile phones will attract tax at 12%. As a result, almost all phones will become slightly cheaper.However, GST is expected to make domestically manufactured phones more expensive than imports. This is because such phones enjoyed benefits of low taxation under the ‘Make in India’ movement.

Approximately 80% of the over 59 million phones during January to March were domestically manufactured. The prices of imported phones are expected to remain about the same in the post-GST regime.

Mobile bills set to rise

In addition to the increase in the price of domestically manufactured phones, your phone bill will also rise. The mobile service providers will now pay GST at a rate of 18%. This is higher than the previously applicable service tax rate of 15%. Therefore, telecom services will now be more expensive under the new single tax regime.

Although input tax credit (ITC) is available for GST, it will not significantly benefit the telecom service providers. This is because the ITC will be available only for the purchase of goods, which will amount to approximately 0.5% of revenues. In comparison, the increase in the applicable tax rate is 3% making telecom services more expensive.

Case study

Let’s take an example to understand this increase in prices a little better. Imagine that you have purchased a smartphone for INR 10,000. And have a monthly phone bill of INR 500.

  • In the previous taxation regime, depending on the state you have made the purchase from, the VAT on the phone would have been 13.5% and the service tax on your phone bill would be at the rate of 15%. Thus your phone would total to INR 11,350 and your phone bill would be INR 575.

  • With GST, the rate on purchase of your handset is 12% and the rate on the telecom service is 18%. Thus, your phone will now cost INR 11,200 and your phone bill will be INR 590.

India is still an expensive market for buying mobile phones. The expected increase in the prices of domestically manufactured phones and telecom services may impact the growth of this industry. However, you do not have to despair. You may still be able to buy your desired smartphone by using an easy and quick consumer durable loan (CDL).

Here are four features of such loans.

  1. Easy and quick procedure

Availing of a CDL loan is a quick and simple procedure. You need to submit some basic documents like an identity and residential address proof, bank account details, and office address with the application form. You will receive the approval in a very short period of time.

  1. Affordable interest rate

Such loans are available at an affordable rate of interest. This ensures you are able to afford the equated monthly installment (EMI) without any financial difficulties. A competitive interest rate ensures you are able to buy your desired mobile on EMI. You may also avail of zero interest loans, which will make your purchase more affordable.

  1. Higher loan amount

Financial institutions like Capital First offer a loan between INR 8000 and INR 5 lakh. Therefore, you may be assured of buying a mobile phone on EMI without worrying about where to find the money.

  1. Flexible repayment schedule

Such loans are available for different tenures ranging up to a maximum duration of 24 months. Therefore, you are able to choose a loan duration that best suits your financial situation.

Purchasing an EMI phone is a good way to get your desired handset in the post-GST regime. It is recommended you check the terms and conditions offered by different lenders to make an informed decision.