Made In India Smartphones Will Become Costly As Excise Duty Hiked By 2.5%; Exports Will Be Spared

The prices of mobile phones manufactured in India are going to increase slightly in the new year. The price hike is the result of the proposal of union budget 2021 to impose a 2.5% custom duty on the import of electronic components that are required during the manufacturing of smartphones.

The new union budget has excluded the custom duty only on exports. This means every phone that is produced commercially for domestic purposes in India will experience an increase in its price. The Finance Minister, Nirmala Sitharaman said that the government is removing few exemptions on the chargers and components of mobile phones to add more value.

What Is The Reaction From the Industry?

The mobile manufacturing industry is not satisfied with the new arrangement. They feel that this new policy will fade away the competitiveness achieved through the Production Linked Incentive (PLI) scheme. 

Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA) said that the proposal will have an impact of 0.3% to 0.4% on the customers. “The mobile and electronics sector should have been spared the general removal of exemptions where there was zero percent import duty,” he said.

Besides, he also thinks that this decision will affect the 18% GST taxation since ‘Zero custom duty does not mean zero-taxation’

Was The Decision Taken Against the Industry’s Will?

Mohindroo alleged that the decision to increase mobile prices was taken against the consultation of the industry and said that the recommendations of the State Electronics & Information Technology minister were not considered. He claimed that the inactiveness of PMP and the weak exports compelled PLI to address disabilities for the sake of competitiveness.

“This spate of duties takes us right back-queering the pitch for electronics exports and we request the government to maintain the status quo,” he added.

From When Will The New Policy Be Applied?

The Finance Minister has announced that the excise duty on some components of mobile and electronics will be increased from 0 to 2.5%. These parts include printed circuit board assembly, camera modules, and connectors.

On the other hand, the duty for the manufacture of PCBA, moulded plastic, chargers and adapters will increase from 10% to 15%. The customs duty for all the other inputs and parts of a charge, and assemblies of phone like display panel, PCB, mechanics and die-cut part will be set at 10%.

Besides, build up units of battery chargers and handsets will allure a custom duty of somewhere between 15 and20% and 22.5% respectively. Currently, components on which customer dusty is applicable make up 50% of the total bill of a mobile phone.