NEW DELHI: The government is likely to impose basic customs duty on mobile phone components such as populated printed circuit boards (PCBs), camera modules and connectors from April 1, according to senior officials.
These products are currently imported without any levy. Imported mobile handsets such as the latest iPhones have become costlier after the February 1 budget raised customs duty on the devices to 20% from 15%. Domestic handset makers had expected the imposition of duty on components too in the budget. Whether that will also lead to an increase in the price of phones will depend on manufacturers absorbing the levy or passing it on to consumers, experts said.
The relevant ministry had sought the levy on parts in a prebudget representation. "The proposal to impose duty on PCBA (PCB assembly), camera modules and connectors had been sent from the ministry of electronics and IT," said one of the officials cited above.
PCBs account for almost half the manufacturing cost of a mobile phone. Their assembly in India will not only take the level of local value addition beyond the current level of 10%, but also encourage local manufacture and boost the government's Make in India initiative, industry executives said. If imposed, the duty will be made effective from the coming financial year to coincide with the government's Phased Manufacturing Programme (PMP)—a long-term plan aimed at bringing component manufacturingto India in the mobile phone space
Handset makers currently only assemble the units in India. "India is feverishly working towards developing a globally competitive mobile handset and component industry," said Pankaj Mohindroo, president of the Fast Track Task Force, which worked with the electronics and IT ministry to create the PMP. "The government is not tentative and therefore the process of disincentivising imports will continue without sacrificing long-term competitiveness."
PMP, notified in May last year, was aimed at boosting indigenous production of mobile phones by providing tax relief and other incentives on components and accessories used for mobile handsets. Through measures like this, the government also hopes to reduce the country's electronics import bill.
"It will be too early to say whether there will be a price increase because the rate of duty increase is not yet finalised," Bipin Sapra, head of indirect tax at consultancy EY, said with regard to basic customs duty on phone parts. "It also depends on handset makers, as to how much of the increase can they absorb."
In the first phase, a 10% import duty on fully made mobile phones was imposed in July last year. It was increased to 15% in December and raised to 20% in the budget. The programme aims to boost the share of indigenously procured components in the manufacture of feature phones to 37% from about 15% now, and in smartphones to 26% from about 10%.
India's mobile phone industry has been a key element of the Make in India initiative, which was launched in September 2014. Since then, 107 phone and component-making units have been set up by brands such as Apple, Samsung, Xiaomi, Oppo and Vivo, among others. The sector has been recording year-on-year growth, in both value and volume terms, on the back of duties imposed on imported phones, which incentivised local manufacturing-—about 81% of volume and 84.5% of value is manufactured in India. " "Development of a global-scale mobile handset and component industry is being pursued passionately," Mohindroo said.
Source : economictimes.indiatimes.com