Customs duty hike to make imported mobile phones, chargers slightly expensive
But industry observers say the hike in import duty will not affect consumers at large, as nearly 97 per cent of mobile market requirements is being met through domestic production.
The government has also announced that it will come up with a new scheme to encourage domestic manufacturing of mobile phones, electronic equipment and semiconductor packaging in order to make India a part of the global manufacturing chain and boost employment opportunities.
"Under Make in India initiative, well laid out customs duty rates were pre-announced for items like mobile phones, electric vehicles and their components. This has ensured gradual increase in domestic value addition capacity in India. Customs duty rates are being revised on electric vehicles, and parts of mobiles as part of such carefully conceived Phased Manufacturing Plans," Finance Minister Nirmala Sitharaman said in the Budget speech.
Mobile phones were earlier exempted from 10 per cent service welfare cess but it will now be re-imposed on imported handsets over and above existing 20 per cent basic customs duty.
The hike in import duty will not affect consumers in India much because 97 per cent of mobile market requirements is being met through domestic production, according to industry experts.
The finance minister announced increase in duty on chargers from 15 per cent to 20 per cent, motherboard from 10 per cent to 20 per cent and in similar range for other components used in manufacturing of mobile phones.
The government, however, deferred imposition of import duty on touch panels and cover glass for mobile phones to October 1, 2020 instead of April 1, 2020 as was envisaged in the phased manufacturing plans.
"Regarding the duty increase on PCBA (motherboards) from 10 per cent to 20 per cent and chargers from 15 per cent to 20 per cent, India has already built very large capacities. This change will lead to further manufacturing of 10 crore plus PCBAs and 5 crore-plus chargers in India," ICEA Chairman Pankaj Mohindroo said.
Vivo India Director for Brand Strategy Nipun Marya said: "We established our manufacturing facility in the first year of our operations in India. In 2019, we had successfully integrated SMT lines (assembly lines) in our facility in Greater Noida, and ever since have been manufacturing PCBs (motherboard) there".
According to Counterpoint Research, Vivo was second largest smartpone player in the last quarter of 2019 in terms of sales with 21 per cent market share.
India has also started exporting chargers for both mobile phones and laptops. It is estimated that domestic charger production in India is to the tune of Rs 1 lakh crore. The fresh import duty may encourage production of another Rs 5,000 crore worth of chargers.
"Increase in import duty of mobile phone components such as display panel, touch panel, microphone, receiver and printed-circuit- board to 10 per cent from nil, will ensure further Indianisation of products and increase intensity of production in India," EY emerging markets TMT leader Prashant Singhal said.
The government's decision to crackdown on non genuine imports under free trade agreement is expected to give further boost to manufacturing of mobile and electronic products.
IT hardware body MAIT appreciated incentives in the Budget for mobile phone industry.
MAIT President Nitin Kunkolienker suggested that "the government needs to include IT, Datacom, Medical and other subsectors of electronics. While the scheme is still in the works this will result in rise in exports from India."
He said the government's announcement to support setting up of data centers will have direct impact in spurring demand for networking products and servers.
"The new proposed scheme to promote domestic electronic manufacturing must include networking and servers. The other aspect of this measure is it is setting the back end foundation for small cell 5G network. Which when it comes will again result in demand for networking products," Kunkolienker said.
The government has also proposed increase in import duty on mobile base station by 10 per cent which is expected to make deployment of telecom network in the country expensive as over 90 per cent of telecom network gears are currently imported.
"Emphasis on Make In India and preferential market access compliant products would help India achieve better results rather than by giving incentives for assembly in India," PHD Chamber of Commerce and Industry, telecom committee head, Sandeep Aggarwal said. PRS SR MBI PRS ANU ANU