Cellphones are likely to get costlier as the Union Budget 2021-22 has proposed to levy import duty on mobile phone components and chargers to enhance local value addition.
Finance Minister Nirmala Sitharaman on Monday announced 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 part of chargers and sub-parts of mobiles. Further, some parts of mobile rate will move from nil to a moderate 2.5 per cent,” she said.
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 thrust now has to be on easy access to raw materials and exports of value addition,” Sitharaman said.
The government has proposed a 2.5 per cent customs duty on printed circuit board assembly (PCBA), commonly known as motherboards, camera modules, connectors, parts and sub-parts to manufacture lithium ion battery and battery pack with effect from April 1.
The import duty on PCBA for making any charger is proposed to be raised to 15 per cent from 10 per cent with effect from February 2. The finance minister announced withdrawal of duty exemption on components used for mobile chargers and imposed a 10 per cent duty on them effective from the same day.
Tarun Pathak, Associate Director at Counterpoint Research, said there might be an increase in prices for the short term or a modest increase, as bulk of these sub-components have already local suppliers.
Concessional rate of basic customs duty on ink cartridges, ribbon assembly, ribbon gear assembly and ribbon gear carriage for use in printers for computers has also been revoked.
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 per cent import duty. “Zero customs duty does not mean zero taxation. These inputs suffer 18 per cent GST (goods and services tax),” he said. “This increase is also against the consultation held with the industry and the recommendations of the subject ministry and experts.”
He said that the Phased Manufacturing Program (PMP) was not working and exports were weak that propelled production-linked incentive (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, accordingly, changes in duty structure were made in the Budget.
“There is a big scope to localise value addition in these areas as well. We see that the government has an aim of increasing value addition in the country for the manufacturing sector. Making India self-reliant and also competitive at the same time may lead the government to not fully exempt the sector from taxation,” Pathak said.