Recently, the Supreme Court of India held the view that chargers should be classified as accessories even when it is bundled with mobiles in a single box. On top of this, various state governments have already started demanding separate VAT on mobile chargers by treating it as an accessory for the purpose of taxation.
ICA’s National President Pankaj Mohindroo in a letter to Finance Minister Arun Jaitley said mobile chargers should be treated as an integral part of the mobile phone based on International practice. “Providing chargers along with mobile handsets as free of cost has been a well accepted business practice globally.”
The Customs Accessories (Condition) Rules, 1963 notified by Notification No. 18- Cus dated 23.1.1963, specifically provides that accessories compulsorily supplied free with an article should attract the same rate of duty, which is applicable on the imported article.
“Though ICA has agreed with the Supreme Court judgement that a Charger is not a part of a mobile but an accessory, nowhere in the judgment the Supreme Court had suggested VAT authorities to start taxing the chargers separately,” Mohindroo said.
ICA wants finance minister to advise states to introduce Accessories (Condition Rules), similar to the Accessories (Condition) Rules, 1963. The states may be further advised to amend VAT schedules with provision that actions done till now will be deemed not to be done.
States, where the industry is facing the huge demands on a retrospective basis are: Rajasthan, Uttar Pradesh, Bihar, Kerala, Karnataka (only retrospective, prospectively they have amended), Punjab and Himachal Pradesh.
Some of the members of ICA include Apple, Samsung, Micromax, Microsoft, Nokia, Motorola, HTC, Gionee, Blackberry, Sony, LG, Panasonic, Spice, Intex, Lava etc.