India will now focus more on local smartphone manufacturing business as Finance Minister Nirmala Sitharaman announced the removal of a few custom duty exemptions on importing parts of mobile chargers and sub-parts of mobile phones.
The announcement also included the custom duty on some parts of the handsets moving towards 2.5 percent from 0 percent. Some of the new changes will be effective starting 2nd February while the remaining will come into effect starting April 1st.
These changes mean that we could soon witness a price hike in smartphone prices in India, reason being manufacturers passing the load onto the customer.
“Domestic manufacturing has grown rapidly, we are now exporting items like mobiles and chargers. For greater domestic value addition, we are withdrawing a few exemptions on parts of chargers, and sub-parts of mobiles. Further, some parts of mobiles will move from ‘nil’ grade to a moderate 2.5 percent”, said Sitharaman.
Mobile parts including Printed Circuit Board Assembly (PCBA), Camera Module, and Connectors will have 2.5 percent tax get levied on them. Parts and sub-parts for manufacturing the battery and the battery pack will face a similar tax rate levied. These new rates will be effective from 1st April 2021.
Starting February 2nd, rates on import of PCBA and moulded plastic for manufacturing of charger or adapter will face an increase from 10 percent to 15 percent, along with all the other parts required that are required for assembling a mobile charger will have a custom duty levied of about 10 percent.
If the smartphone manufacturers decide to carry forward this tax burden onto the customer, it will mean a price hike for the final price of the smartphone and the chargers. If the manufacturers decide to switch to locally manufactured components, it might help them reduce the impact of increased tax rates.
“There is a focus on electronics manufacturing and increase in duty for certain sub-components is a push to localise some of these components. This might increase prices for term short term or see a very modest increase as bulk of these sub-components already have local suppliers like for Camera modules, PCBAs, chargers, connectors etc”, as per Prachir Singh, Senior Research Analyst, Counterpoint Research.
“Like recent PLI scheme for telecom equipment manufacturing, Consumer IoT, routers and switches, customer premise equipment, next-generation radio access networks and all. There is a big scope to localise value addition in these areas as well”, she adds.