written by Khatabook | September 29, 2021

Effect of GST rate on Domestic Appliances and Electrical Machinery

The Goods and Services Tax (GST) is a single tax that applies to the supply of goods and services from the manufacturer to the final consumer. It aims to decrease manufacturing costs and create a more uniform and simplified economy where goods and services are more evenly priced. Don't be concerned if you're thinking about purchasing a refrigerator or any electronics for your home but aren't sure if you'll have to pay GST on electronic items. After reading this article, you will better understand the GST rate on refrigerators and the impact of GST on electronic goods.

What are the various GST rates?

According to the products, the Goods and Services Tax (GST) is divided into five separate rates: 0%, 5%, 12%, 18%, and 28%. The GST rate on electrical goods, such as consumer electronics and electrical machinery, is discussed in this article.

Let's look at which electrical goods fall under which tax bracket:

GST Rate at 5%:

  • Vehicles that run on electricity, such as two- and three-wheeled electric vehicles
  • Biogas plant
  • Wind turbines
  • System for generating solar energy
  • Aircraft engines
  • Hand pumps and parts thereof
  • Other than farm-type machinery and parts, machinery used in the milling sector or for the processing of cereals or dried leguminous vegetables

GST Rate at 12%:

  • Mobile Phone
  • Sewing Machine
  • Bicycle Pumps
  • Milking machines and dairy machinery
  • Apparatus for medical, surgical, dental, or veterinary purposes that uses X-rays or alpha, beta, or gamma radiations, such as radiography or radiotherapy
  • Fuel Cell Motor Vehicles
  • Walkie talkie

Also Read: SAC (Services Accounting Codes) List & GST Rates on Services

GST Rate at 18%:

  • Camera
  • Computer monitors with a maximum size of 32 inches and a television set-top box
  • Printer
  • Tricycles, scooters, pedal cars, and other electronic toys
  • Electrical Transformer
  • Water Pumps
  • Video game consoles and machines
  • Weighing Machine
  • Vacuum Cleaner
  • Other than sporting products, equipment for general physical activity, gymnastics, athletics, swimming pools, and padded pools
  • Washing Machine
  • Water Heater
  • Typewriter
  • Wind Musical Instruments
  • Electronic integrated circuits
  • Gas, liquid or electricity supply or production meters 
  • Cigarette lighters and other lighters, whether mechanical or electrical
  • Hydraulics and their components for tractors
  • Insulating fittings for electrical devices, appliances, or equipment, consisting entirely of insulating material with little metal components.
  • All machinery, including prime movers, instruments, apparatus, and appliances, control gear and transmission equipment, and auxiliary equipment, that are required for the initial setup of a unit or the substantial expansion of an existing unit of a specified industrial plant, irrigation project, power project, or mining project.
  • Parts such as musical box mechanics and accessories such as cards, discs, and rolls for mechanical musical instruments; metronomes, tuning forks, and pitch pipes of various types
  • Static Converters (UPS)
  • Lamps and lighting fixtures, including searchlights and spotlights, illuminated signs, illuminated nameplates, and the like, with a permanently fixed light source, and parts thereof, other than kerosene pressure lanterns and parts thereof, including gas mantles; hurricane lanterns, kerosene lamp, petromax, glass chimney, and parts thereof; LED lights or fixtures, including LED lamps (Metal Core Printed Circuit Board)

GST Rate at 28%:

  • Chassis fitted with engines, for the motor vehicles
  • Dish Washer Machine
  • Monitors and projectors that do not include a television reception system
  • CCTV, digital cameras and video camera recorders
  • Air Conditioner
  • Pumps for dispensing gasoline or lubricants, such as those seen in gas stations and garages
  • Internal combustion piston engines with compression ignition
  • Spark-ignition or compression-ignition combustion engines that require electricity to start or other equipment to start

GST impact on Electronics

Electric and electronic equipment has been subjected to GST based on their purpose and field of application. While most electronics are taxed at 18%, others, such as dishwashing machines, digital cameras, and air conditioners, are taxed at 28% GST on home appliances, indicating that the government's philosophy is to tax luxury items at a higher rate. 

The GST rate on refrigerators and washing machines is set at 18%, which is still high considering that every household owns basic electronic appliances. As a result, manufacturers such as Samsung, Godrej, and LG may have no choice but to raise their prices, burdening end-users. 

Benefits of GST on electronic items 

GST has benefited farm equipment, solar and wind-related apparatus, but it has had little effect on industrial equipment. Domestic appliances saw a 2 to 3% increase in price as the maximum slab of 28% was applied. These items appear to be regarded by the government as a luxury items. With this GST slab, the cost of domestic appliances rises marginally.

Consumer electronics- brown goods and consumer appliances and white goods are the two primary consumer durables categories. The former consist of light electronic appliances such as computers, television etc., whereas the latter include air conditioners (ACs), refrigerators, washing machines, sewing machines, electric fans, and other household items.

  • In the fiscal year 2020, India's refrigerator output was more than 12 million units. Refrigerators accounted for 27% of the consumer appliance industry.
  • In India, the Air Conditioner Market is expected to increase at a compound annual growth rate (CAGR) of 10.7% from 2021 to 2027. 
  • In 2019, the Washing Machine Market in India was valued at over 100 billion Indian rupees with a CAGR of around 3.7% and was expected to increase in the following years significantly.

According to an indirect taxes specialist from the Confederation of Indian Industry (CII), GST as a whole has permitted seamless Input Tax credit, and overall, items have become 3-4% cheaper in general. The expert claims that if interest rates fall below 28%, the products will become even more affordable.

Also Read: Steps to Pay GST liability in CMP-08 on GST portal

Conclusion

The Goods and Services Tax (GST) has transformed the economy; it is a game-changing reform for the Indian economy because it establishes an appropriate net price for goods and services subject to a single taxation system. However, GST on electronic items at 18% and 28% has created pressure on consumers. By considering common household appliances such as air conditioners, washing machines, and refrigerators as luxurious items, this rate impacts consumer purchase. On the contrary, GST has also aided in ensuring uniformity of indirect tax rates across the country. To learn more about GST and its impact, download Khatabook

FAQ’s

Let's look at some of the most frequently asked questions on electrical items GST rate.

1. What is the GST rate for water purifiers and filters?

Filters and water purifiers are subject to an 18% GST rate.

2. What is the HSN code for the battery for mobile devices, and what are the GST rates?

The battery for mobile handsets is taxed at a rate of 28% under HSN code 8506.

3. Will a mining business be able to claim GST on the purchase of all earth moving machines, including JCBs, tippers, and dumpers, as input credit?

The CGST Act, 2017, Section 17(5) (a) bans credit on motor vehicles. Furthermore, under Section 2(76) of the CGST Act, 2017, mining equipment such as tippers and dumpers are excluded.

As a result, the GST paid on the purchase of moving machines such as tippers and dumpers used to transport machines by a mining firm will be permitted as an input credit under current laws.

4. Will railway sliding require Input Tax Credit?

Since railway siding is not designated as plant and machinery under section 17 of the CGST Act, 2017, input tax credit (ITC) will not be available.

5. Is there a GST on electricity bills?

No, GST is not applied to electricity bills because electricity distribution is exempt from GST.

6. At various places, banks deploy diverse equipment such as point-of-sale machines or ATMs. Equipment must occasionally be relocated between locations for maintenance, encryption, and other reasons. Will such a movement be considered a supply under the GST law?

In such situations, the procedure set out in Section 143 of the CGST Act, 2017 and Rule 55 of the CGST Rules, 2017 may be followed. The movement of equipment for repairs, maintenance, or other purposes is not considered a supply. 

The Banks may move the equipment to the third-party service providers' locations. After repairs, the equipment may be moved to a central/regional location for programing, encryption, reconfiguration, and other purposes. It may then be returned to the business location from which it was originally sent. A 'delivery challan' can be used to convey equipment between these locations.

7. A doctor owns and operates a diagnostic centre as well as a medical distribution company. He wants to sell the diagnostic equipment from his diagnostic centre, for which he keeps separate books of accounts. Should he levy GST on the sale of diagnostic equipment?

The sale of diagnostic equipment will be included in the scope of delivery. As a result, it would be taxable under the CGST Act's provisions. Even though separate books of accounts for the exempted service (health care service) are kept, the exemption as notified under NN 12/2017-CTR as amended from time to time is only available for the supply of health care services.

However, based on a suitable classification of the diagnostic machinery, it is vital to check whether there is any goods-based exemption available under NN 2/2017-CTR as amended from time to time for diagnostic machinery. The sale of diagnostic machinery will be subject to tax as a supply of goods unless there is an exception.

8. When a machine is utilised for both work and personal purposes, how much ITC can be claimed?

The amount of credit is limited under the input tax because of the purposes of a business, according to section 17 (1) of the CGST Act. When goods or services, or both, are used by the registered person partly for any business, and partly for other purposes, the amount of credit is limited to so much of the input tax as is attributable to the purposes of his business.

The process for reversing ITC on capital goods when used for office and personal use is not specified in Rule 43 of the CGST Rules. When the output is both taxable and exempted, the current Rule 43 provides a reverse mechanism. Regardless of the lack of a machinery provision, if a taxpayer recognises a capital good used for business and non-business purposes, the same must be reversed on any established reasonable grounds.

9. Is it possible to claim ITC for the lift and escalator in the office? If such office space is rented out, will the outcome be different?

 If the provisions of section 16 of the CGST Act are met, ITC can be claimed for all products or services, or both, subject to the constraints of section 17 of the Act. Lifts and escalators placed in offices will not be eligible for ITC based on a literal interpretation of sections 17(5) (c) and (d). The provision includes, among other things, the following: 

The input tax credit shall not be granted in respect of the following, notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, namely:

  1. Contract services for works unless it is an input service for further provision of works contract service when supplied for the building of an immovable property (other than plant and machinery).
  2. The taxable person receives goods or services or both for the construction of an immovable property (other than equipment or machinery) on their account (including when such goods or services or both are utilised in the conduct or furtherance of business).
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