Finance minister Arun Jaitley’s latest budget proposed an increase in customs duty on a range of products, including television sets and cellphones.
Among the main focuses of the much-awaited Union Budget for FY19 was on promoting the initiative of Make in India. This has several implications for the electronic industry, particularly mobile phones.
Finance minister Arun Jaitley’s latest budget proposed an increase in customs duty on a range of products, including television sets and cellphones, in a bid to incentivize domestic production and value addition.
Apart from giving a fillip to the Make in India initiative, customs duty has been raised with the aim of curbing imports, mainly from China. India’s largest imports are from the Asian dragon, which stood at a whopping US$60 billion in 2016. Among the top 20 items imported from China are mobile phones, laptops, watches, cell phone accessories, pen drives and cameras.
India’s total imports have been rising at a phenomenal rate, with the figure for December (2017) alone reaching a mindboggling US$41.91 billion. So, something needed to be done urgently.
Electronics companies targeting the Indian market have more to worry about than just the meaningful hike in customs duty. Apart from this, the Union Budget 2018-2019 has unexpectedly increased cess. This came as a huge surprise.
The budget has abolishment of Education Cess and Secondary and Higher Education Cess on imported goods. However, this has been replaced by the imposition of a Social Welfare Surcharge, which has an additional impact of 7% on the aggregate custom duty on imported goods.
These measures would give a thrust to local manufacturing and is great news for homegrown companies.
India is among the world’s fastest growing cell phone markets and has seen a massive inflow of handsets over the past couple of years. In fact, in 2017, India welcomed a number of Chinese smartphone brands, vying for attention with bezel-less screens, 18:9 aspect ratio displays, dual rear cameras, 4G connectivity and ever-increasing internal memory. Notable among these were Gionee, Huawei, Lenovo, Letv (LeEco), OnePlus, Oppo, Vivo, Xiaomi and Zopo.
The latest Union Budget has made imported mobile phones more expensive to buy in India, with an increase in customs duty from 15% to 20%.
The Indian customer may not be that worried. “There will be no increase in mobile phone prices since 81% of the volume and 84.5% of value is manufactured in India and we will cross 90% in both terms in 2018,” PTI quoted Indian Cellular Association (ICA) National President Pankaj Mohindroo as saying. Mohindroo added that the latest Union Budget will be the “last nail in the coffin” for such imports.
The finance minister has raised the customs duty rate even on completely knocked down or semi-knocked down imports of mobile phones and watches. Imported mobile accessories would also need to pay a higher customs duty of 15%. This includes PCBA (printed circuit board assembly) of accessories like batteries & chargers.
There has been growing demand for smartwatches and wearables. The customs duty on these has been doubled to 20%.
The Union Budget has also increased the duty on certain TV components. For instance, the custom duty rate for LCD and LED panels has been hiked from the current 7.5% to 15%.
With these measures in place, it won’t be surprising to see technology and electronics companies setting up their manufacturing or assembling units in India. Companies like Apple and Xiaomi, which had already begun the move, would be eager to expedite their programs to Make in India.