Imported smartphones may become costlier. Here’s why

The Prime Minister Narendra Modi-led Government wants to push ‘Make in India’ and boost local manufacturing. In a bid to achieve this, the government may slap customs duty on imported mobile phones.

Once the Goods and Services Tax (GST) comes into effect, the government may introduce a tax on imported phones to ward off Chinese imports and induce companies like Apple to make in India.

Such a move could, however, increase the price of imported smartphones by 5-10%.

A legal opinion is being taken by the ministry of electronics and information technology so that customs duty on phones does not violate the Information Technology Agreement (ITA), an international pact which mandates signatory countries to allow duty-free imports of certain electronics products.

In addition, certain exemptions that are currently available to domestic handset makers - such as no countervailing duty on imported electronic components - will have to go after the GST regime comes into force. Imposition of customs duty will protect local manufacturers.

Though no final decision has been taken on the quantum of the duty, it is expected to be 5-10%.

A senior IT ministry official told ET that according to ITA, one to many push button cellular telephony devices are exempt. "We are saying that our phones, even feature phones, are one to one, they are not one to many, so therefore all phones are not covered under ITA. The attorney-general's legal opinion also said that ITA did not cover mobile phones," said the official.

"The present incentives to manufacture mobile phones in India need to be continued under the GST regime. Raising customs duty is a simple solution, if ITA so permits," Bipin Sapra, partner, EY, told ET.