While the increase in customs duty on mobile phone parts and electronics goods announced in Budget will give a fillip to domestic manufacturing, it is also likely push up handset and durables prices, say manufacturers.
“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’ rate to a moderate 2.5 per cent,” Finance Minister Nirmala Sitharaman said.
Promote manufacturing
“The customs duty revision for the compressors, used in refrigeration and air conditioning, from 12.5 per ent to 15 per cent will promote indigenous manufacturing of the same and is in line with making India self-reliant in the long run. There have been increases in import duties on motors and PCBs as well. These are good for the medium and long-term but will impact price adversely in short term due to insufficient output capacities,” said Kamal Nandi, President of Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head & Executive Vice President– Godrej Appliances.
The mobile and electronics sector should have been spared the general removal of exemptions where there were zero per cent import duty, said Pankaj Mohindroo, Chairman, India Cellular & Electronics Association (ICEA). “Zero customs duty does not mean zero taxation. These inputs suffer 18 per cent GST also. This increase is also against the consultation held with the industry and the recommendations of the subject Ministry and experts,” he added.
“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,” explained Mohindroo.
Export perspective
Navkendar Singh, Research Director, International Data Corporation (IDC), said the benefits to local manufacturing and exports that the increase in customs duty will bring about will offset the price increase. From an export perspective, this will push companies to start putting major scales here to manufacture, he said. With mobile chargers set to get slightly more expensive, this can lead mass phone companies to offer phones without a charger in the box from the second half of the year, in line with the practice followed among phones priced above ₹50,000, he added.
“With personal income tax remaining unchanged, we hope that GST council will rationalise rates in AC, TV, Fans etc to stimulate consumer demand,” said Nandi.