On Monday, the government proposed to impose import duty on components of mobile phones and chargers to enhance local value addition, a move that may marginally impact handset prices. Finance Minister Nirmala Sitharaman announced a review of 400 exemptions in customs duty, including those applicable on the mobile devices segment. “For greater domestic value addition, we are withdrawing a few exemptions on the part of chargers and sub-parts of mobiles. Further, some parts of the mobile rate will move from nil rate to moderate 2.5 percent,” Sitharaman said.
She added that the customs duty policy must have twin objectives of promoting domestic manufacturing and helping India get on to the global value chain and export better.
“The trust now has to be on easy access to raw materials and exports of value addition,” Sitharaman said.
The government has proposed a 2.5 percent customs duty on the printed circuit board assembly (PCBA), commonly known as motherboard, camera module, connectors, parts, and sub-parts, to manufacture lithium-ion battery and battery pack with effect from 1 April.
The finance minister announced the withdrawal of duty exemption on mobile chargers’ components and imposed 10 percent duty on them with effect from 2 February. The import duty on PCBA for making any charger is proposed to be raised to 15 percent from 10 percent imposed earlier with effect from 2 February.
Counterpoint Research Associate Director Tarun Pathak said there might be an increase in prices for the short term or a modest increase, as the bulk of these sub-components already have local suppliers.
Besides this, the concessional rate of basic customs duty on ink cartridges, ribbon assembly, ribbon gear assembly, and ribbon gear carriage for printers’ use for computers has been withdrawn.
India Cellular and Electronics Association Chairman Pankaj Mohindroo said the mobile and electronics sector should have been spared the general removal of exemptions where there was a zero percent import duty.
“Zero customs duty does not mean zero taxation. These inputs suffer 18 percent GST (goods and services tax) also.
“This increase is also against the consultation held with the industry and the recommendations of the subject ministry and experts,” Mohindroo said.
He said that the Phased Manufacturing Program (PMP) was not working and exports were weak that propelled production-linked incentives (PLI) for the sake of competitiveness to address disabilities.
“This spate of duties takes us right back-queering the pitch for electronics exports. We request the government to maintain the status quo,” Mohindroo said.
The PMP scheme was notified in 2016. It has provisions for duty intervention to boost the mobile manufacturing ecosystem in the country on mobile, and according to changes in duty, the structure was made in the budget.
“There is a big scope to localize value addition in these (components on which duty has been imposed) areas as well. We see that the government aims to increase value addition in the country for the manufacturing sector.
“Making India self-reliant and also competitive at the same time may lead the government not fully to exempt the sector from taxation,” Pathak said.
