Looking for expert help with Income tax and GST for electronics and home appliance shop owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Air conditioners, TVs of every size, refrigerators, washing machines, mobile phones, laptops, mixers and fans are all 18% GST from 22 September 2025 (Notification 9/2025-Central Tax (Rate), Schedule II).
- Sewing machines and solar water heaters are 5%. Give them their own item codes in your billing software.
- A free warranty replacement you make for the manufacturer carries no GST. Billing the manufacturer for it does.
- At 18%, composition only saves money if GST on your stock and rent is below about 14.25% of GST-inclusive sales, and it costs you business customers who need a tax invoice.
- Electronics margins are thin. If your real profit is below the 6% Section 44AD figure, check the five-year lock-in before you switch to books.
What is the GST rate on ACs, TVs, fridges and washing machines in India? From 22 September 2025, air conditioners (HSN 8415), refrigerators (8418), household washing machines (8450), dishwashers (8422) and televisions of all sizes (8528) attract 18% GST under Schedule II of Notification 9/2025-Central Tax (Rate). Mobile phones (8517) and laptops (8471) are also 18%.
An electronics showroom looks simple on the GST side now: nearly everything on the floor is 18%. The complications sit elsewhere. Warranty swaps, exchange offers, manufacturer credit notes and third-party extended warranty plans all show up in your returns, and each has its own rule. On the income tax side, the problem is the reverse of most shops. Your margin is often thinner than the 6% that Section 44AD assumes. This guide covers both for AY 2026-27. If you mostly repair phones rather than sell them, see our income tax guide for mobile repair shops.
What GST rate applies to what you sell?
Comparison
GST Rates for Electronics and Appliance Shop Items (from 22 September 2025)
| Item | HSN | GST rate |
|---|---|---|
| Air conditioners | 8415 | 18% |
| Refrigerators and freezers | 8418 | 18% |
| Household dishwashers | 8422 | 18% |
| Household washing machines, including washer-dryers | 8450 | 18% |
| Televisions (all sizes), monitors, projectors, set top boxes | 8528 | 18% |
| Mobile phones | 8517 | 18% |
| Laptops and computers | 8471 | 18% |
| Mixers, grinders and other motorised kitchen appliances | 8509 | 18% |
| Geysers, irons, microwave ovens, room heaters | 8516 | 18% |
| Water purifiers | 8421 | 18% |
| Sewing machines and their parts | 8452 | 5% |
| Solar water heaters | 8419 12 | 5% |
Source: Notification 9/2025-Central Tax (Rate), Schedule II S. No. 404, 407, 410, 411, 437, 456, 482, 489, 490, 500; Schedule I S. No. 428, 435
Within your state you charge 9% CGST plus 9% SGST; to another state, 18% IGST. Stock that a supplier invoiced before 22 September 2025 keeps the input tax credit (ITC) at whatever rate the supplier charged. Your sale today goes out at the current rate.
If you install an AC and charge for it on the same bill, the installation is part of a composite supply. It takes the rate of the main supply, the AC, so 18% (Section 8(a), CGST Act).
How do exchange offers work under GST?
Say a 43-inch TV sells for Rs 40,000 plus GST without an exchange. A customer brings an old set, you give Rs 5,000 off, and they pay Rs 35,000 plus GST in cash. You still charge GST on Rs 40,000, so Rs 7,200, not Rs 6,300. Rule 27 of the CGST Rules values a sale paid partly in goods at the open market value of what you sold. The rule's own illustration uses a new phone bought with an old phone in exchange: the value is the price of the new phone without the exchange.
The old TV you take in is now your stock. When you sell it on, that's a fresh sale with its own GST.
Warranty replacements and extended warranties
This is where electronics dealers most often get their returns wrong. The Central Board of Indirect Taxes and Customs (CBIC) set out the rules in Circular 195/07/2023-GST and extended them from parts to whole products in Circular 216/10/2024-GST:
Step-by-Step Guide
GST on Warranty Work Done by a Dealer
Free replacement or repair for the customer
No GST, as long as you charge the customer nothing. Any extra charge (for example, an upgrade fee) carries GST on that amount.
You bill the manufacturer for the replaced unit or part
Issue a tax invoice to the manufacturer and pay GST on it. The manufacturer takes the credit. You don't reverse your ITC.
The manufacturer sends you the replacement free
No GST on the manufacturer's replacement, and no ITC reversal for either side.
You replace from your own stock and the manufacturer issues a credit note
The manufacturer can adjust its tax, but only once you've reversed the ITC you took on the replaced unit.
You bill the manufacturer for repair labour
That's your service to the manufacturer. Charge GST on the invoice or debit note.
Source: Circular 195/07/2023-GST dated 17-7-2023; Circular 216/10/2024-GST dated 26-6-2024
The credit-note case is the one to watch. If a manufacturer's credit note for a replaced fridge lands in your GSTR-2B and you haven't reversed the matching ITC, your books and the manufacturer's won't agree.
Extended warranties depend on who gives them. If your shop gives its own extended warranty at the time of sale, it's part of a composite supply with the product and is taxed with it. If the manufacturer or an insurance-backed warranty company provides the plan, it's a separate supply, even when the customer buys it at your counter on the same day (Circular 216/10/2024-GST, para 5.1.1). Keep it off your product invoice. Any commission the warranty company pays you is your own separate supply to them.
When do you need GST registration?
If you only sell goods, registration is required once aggregate turnover crosses Rs 40 lakh in most states. Telangana and several other states kept the Rs 20 lakh limit (Notification 10/2019-Central Tax). A Hyderabad appliance shop selling Rs 25 lakh a year must register. Selling to a buyer in another state needs registration from the first rupee (Section 24(i), CGST Act). Our GST registration service can set this up for you.
Regular scheme or composition?
Under the composition scheme, a trader pays 1% of turnover (Rule 7, CGST Rules), up to Rs 1.5 crore a year. You can't charge GST, can't claim ITC and can't sell to other states (Section 10(2)(c), CGST Act). You issue a bill of supply, not a tax invoice.
For an electronics shop that last point matters. An office buying five ACs or twenty laptops wants a tax invoice so it can claim ITC. A composition dealer can't give one, and that customer walks.
On the numbers alone, here's one month at Rs 11,80,000 of GST-inclusive sales (Rs 10,00,000 plus Rs 1,80,000 GST), with stock bought at Rs 9,00,000 plus Rs 1,62,000 GST:
Comparison
One Month, Rs 11.8 Lakh of Sales: Regular vs Composition
| Item | Regular scheme | Composition (trader) |
|---|---|---|
| Tax on sales | Rs 11,80,000 x 18/118 = Rs 1,80,000 | 1% x Rs 11,80,000 = Rs 11,800 |
| Shop A: stock GST Rs 1,62,000 + rent GST Rs 9,000 (rent Rs 50,000) | ITC Rs 1,71,000; pays Rs 9,000 in cash | Rs 1,71,000 becomes cost |
| Shop A: total GST borne | Rs 1,80,000 | Rs 1,82,800 |
| Shop B: own premises, stock GST Rs 1,62,000 only | ITC Rs 1,62,000; pays Rs 18,000 in cash | Rs 1,62,000 becomes cost |
| Shop B: total GST borne | Rs 1,80,000 | Rs 1,73,800 |
Source: Rule 7, CGST Rules 2017; Notification 9/2025-Central Tax (Rate). Figures are illustrative.
The break-even is where GST on your inputs equals about 14.25% of GST-inclusive sales (18/118 minus 1%). Shop A is Rs 2,800 a month better off on the regular scheme. Shop B saves Rs 6,200 a month on composition, but only if almost none of its buyers are businesses. Most showrooms that sell to offices, builders or hotels stay regular. Our composition scheme guide covers the other conditions.
How is your income taxed for AY 2026-27?
Section 44AD lets a resident individual, HUF or partnership firm (not an LLP) declare a deemed profit instead of keeping full books. The limit is Rs 2 crore of turnover, or Rs 3 crore where cash receipts are within 5% of total receipts. The deemed profit is 6% of receipts by UPI, card or bank and 8% of cash receipts.
That's a floor. For a showroom working on a 3% to 5% net margin, it can be above your real profit.
Example 1 (Rs 1.5 crore turnover, new regime): Rs 1.35 crore comes by UPI, card and bank, Rs 15 lakh in cash.
- Deemed profit: 6% of Rs 1.35 crore (Rs 8,10,000) plus 8% of Rs 15 lakh (Rs 1,20,000), so Rs 9,30,000.
- Tax: Rs 20,000 on Rs 4-8 lakh, plus 10% of Rs 1,30,000 (Rs 13,000). Total Rs 33,000.
- The Section 87A rebate covers income up to Rs 12 lakh. Tax payable: nil.
Here the higher deemed profit costs this owner nothing, assuming no other income, and there's no audit.
Example 2 (Rs 2.8 crore turnover, new regime): Cash receipts are Rs 10 lakh (about 3.6%), so the Rs 3 crore limit applies. The other Rs 2.7 crore is digital.
- Deemed profit: 6% of Rs 2.7 crore (Rs 16,20,000) plus 8% of Rs 10 lakh (Rs 80,000), so Rs 17,00,000.
- Tax: Rs 20,000 + Rs 40,000 + Rs 60,000 on the slabs up to Rs 16 lakh, plus 20% of Rs 1,00,000 (Rs 20,000). Total Rs 1,40,000. No 87A rebate above Rs 12 lakh. Add 4% cess of Rs 5,600. Tax payable: Rs 1,45,600.
Say the books show a real net profit of Rs 8,40,000 (3%). On that, tax is Rs 24,000, and the 87A rebate takes it to nil. The gap is large, but switching has costs:
Step-by-Step Guide
Before You Declare Less Than the Section 44AD Figure
Check the last five years
If you declared under Section 44AD in any of them, going below it now bars you from Section 44AD for the next five assessment years (Section 44AD(4)).
Check the audit trigger
Under that bar, if your income is above the basic exemption limit you must keep books and get a tax audit (Sections 44AD(5) and 44AB(e)).
Check the turnover audit limit
Filing on books above Rs 1 crore turnover needs an audit under Section 44AB, unless cash receipts and cash payments are each within 5%, which raises the limit to Rs 10 crore.
Make sure the books support the figure
Your GST returns and bank statements show your sales. A declared profit well below what they imply has to be backed by proper accounts.
File the right form
ITR-4 for Section 44AD if total income is within Rs 50 lakh and other conditions are met; ITR-3 if you file on books.
Source: Sections 44AA, 44AB, 44AD and 87A, Income-tax Act 1961; Finance Act 2025
For a thin-margin dealer the books route can make sense. Weigh the tax difference against audit fees and the five-year lock-in first. See our Section 44AD guide and old vs new regime guide.
Common mistakes electronics shops make
- Billing a sewing machine or solar water heater at 18%. Both are 5%. Electric geysers stay at 18%.
- Charging GST only on the cash part of an exchange sale. The value is the price without the exchange.
- Keeping ITC on a unit the manufacturer has credited. Reverse it, or the credit note won't reconcile.
- Putting a third-party extended warranty on your own tax invoice. It's the warranty company's supply, not part of your product sale.
- Taking Rs 2 lakh or more in cash from one customer for one bill or one day. A wedding order of a fridge, TV and washing machine can cross this easily. It breaks Section 269ST, and the penalty under Section 271DA equals the cash received. See our cash transaction limits guide.
How Tax Garden helps electronics dealers
We file GSTR-1 and GSTR-3B for appliance and electronics shops, with warranty invoices, manufacturer credit notes and ITC reversals matched every month. See our GST return filing service. We also prepare your ITR and check whether Section 44AD or books fits your real margin; see our ITR filing service and pricing. For rate details by product, see our GST guide to phones, laptops and electronics.
