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Publish Date: 21 Mar, 2016
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Mobile Accessories turns expensive

Mobile Accessories turns expensive

 

An article by:-
CA Pradeep Jain
CA Neetu Sukhwani &
Monika Tak

 
Introduction:-
With the hype created regarding implementation of revolutionary taxation reform, i.e., GST in the financial year 2016-17, the government attempted to mentally prepare the assessees as regards substantial reduction in the exemptions available. This is reflected by the levy of excise duty on jewellery except pure silver jewellery. Furthermore, government has also withdrawn exemptions on charger/adapter, battery, wired headsets/speakers etc. usually accompanied by the mobile handsets. This article is an attempt to present the excise duty rates applicable to parts and accessories of mobile handsets.
Glance at the erstwhile provision:-
 

S.No. Chapter Heading Description of goods Rate Condition
272 85 or any other chapter (a)Parts, components and accessories of mobile handsets including cellular phones
(b)Parts, components of battery chargers and hands-free head-phones and PC connectivity cable of mobile handsets including cellular phones;
(c)  Sub-parts of (a) and (b)
Nil 2

 
Condition no. 2:- Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
 
Glance at the amended provisions:-
 

S.No. Chapter Heading Description of goods Rate Condition
272 85 or any other chapter (a)Parts, components and accessories excluding Charger or Adapter, Battery, Wired Headsets and Speakers  of mobile handsets including cellular phones
(b)Parts, components of battery chargers and hands-free head-phones and PC connectivity cable of mobile handsets including cellular phones;
(c)  Sub-parts of (a) and (b)
Nil 2

 
Apart from above, new serial entries have been inserted with respect to charger, adapter, battery, wired headsets and speakers which is reproduced for the sake of quick reference as follows:-

S. no. Chapter or heading or sub heading or tariff items of first schedule Description of excisable goods Rate Conditions
“263B 8504 Charger or adapter for manufacture of mobile handsets including cellular phones. 2% 2 and 16
263C 85 or any other Chapter (a) Inputs or parts for manufacture of charger or adapter of mobile handsets including cellular phones
(b) Inputs or sub-parts for manufacture of parts mentioned at (a) above
Nil 2
263D 8506, 8507 Battery for manufacture of mobile handsets including cellular phones 2% 2 and 16
263E 85 or any other Chapter (a) Inputs or parts for manufacture of battery of mobile handsets including cellular phones
(b) Inputs or sub-parts for manufacture of parts mentioned at (a) above
 
Nil 2
263F 8518 30 00 Wired headsets for manufacture of mobile handsets including cellular phones. 2% 2 and 16
263G 85 or any other Chapter (a) Inputs or parts for manufacture of wired headsets of mobile handsets including cellular phones
(b) Inputs or sub-parts for manufacture of parts mentioned at (a) above
Nil 2
263H 8518 Speakers for manufacture of mobile handsets including cellular phones 2% 2 and 16
263I 85 or any other Chapter (a) Inputs or parts for manufacture of speakers of mobile handsets including cellular phones
(b) Inputs or sub-parts for manufacture of parts mentioned at (a) above
Nil 2

 
For the exemption following conditions should be fulfilled:-
Condition no. 2:- Where such use is elsewhere than in the factory of production, the exemption shall be allowed if the procedure laid down in the Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001, is followed.
Condition no. 16:- If no credit under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 has been taken in respect of the inputs or capital goods used in the manufacture of these goods.
 
Analysis of the amendment:-
In Budget 2016-17, excise duty exemption has been withdrawn on accessories i.e. charger/adapter, battery and wired headsets/speakers for use in manufacture of mobile handsets including cellular phones. However, concessional rate of 2% only if used by mobile handset manufacturers but this concessional rate is not applicable in case where charger/adapter, wired headsets/speakers etc. are sold in open market. Moreover, the exemption is continued on Inputs or parts for manufacture of charger or adapter, battery and wired headsets/speakers of mobile handsets including cellular phones.
 
Furthermore, the reduced rate of 2% is applicable on accessories subject to the condition that Cenvat Credit on Inputs and Capital Goods has not been availed.
It is worth noting that similar changes have also been made in Customs. Basic Customs Duty, CVD and SAD exemptions are being withdrawn on charger/Adapter, Battery and Wired Headsets/Speakers for use in manufacture of mobile handsets. Furthermore, Basic Customs Duty and CVD are being exempted on inputs and parts for manufacture of charger/adapter, battery and wired headsets/speakers of mobile handsets including cellular phone and inputs and sub-parts for use in manufacture of parts of charger/adapter, battery and wired headsets/speaker. Consequently, these goods will also be exempt from SAD.
 
 
Good bye words:- The manufacturers of mobile handsets including cellular phones have the option to clear mobile handsets at the concessional excise duty of 1% provided no cenvat credit on inputs/capital goods is being availed. Now, concessional rate of 2% without cenvat is being specified for adaptors, chargers, wired headsets/speakers etc. Hence, the mobile manufacturers may either opt for cenvat credit facility by paying excise duty at full rate or adopt the practise of expensing the concessional excise duty without availing any cenvat credit.

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PRADEEP JAIN, F.C.A.

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Phone No. :
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Fax No. :0291 - 2439496


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E-mail :pradeep@capradeepjain.com