Mobile phone handset companies seek rationalisation of GST on batteries

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Indian handset makers have asked the government to rationalise taxes levied on batteries and issue a clarification that the goods and services tax (GST) on lithium-ion batteries used in smartphones and feature phones should be levied at 12%, on par with the rate on parts used to make mobile phones.

“… it may be clarified that 12% GST on parts for mobile manufacture covers batteries, which are to be inserted into the mobile. There is no revenue implication on this measure; but it will greatly ease the pain which our manufacturers are being subject to,” the Indian Cellular Association said in a letter to revenue secretary Hasmukh Adhia dated June 6. A copy was seen by ET.

The association had said earlier that there is a “tendency” on the part of the revenue administration to deny the 12% rate to batteries for manufacture of mobiles and 18% for sale to the replacement market and put them in the 28% category. This is happening especially in imports, where integrated GST is sought to be levied at 28%, even if the shipments are for manufacturing, according to a letter sent by the association to the revenue secretary in April.

In its latest letter, the association said that having three types of GST results in interpretational challenges, breaks the manufacturing supply chain significantly in the input tax credit system and impairs viability of low-margin production. The association asked for GST on rechargeable lithium-ion batteries to be reduced to 18% from 28% currently, in line with other batteries.