The Indian government, which announced its Budget for the year 2021 made many important announcements, which also included some announcements that would impact the smartphone segment in quite a major way. In an announcement made by Finance Minister Nirmala Sitharaman, the government has decided to remove exemptions on parts of chargers and mobiles in a bid to promote local manufacturing. The new Budget proposes an increase from 0 to 2.5% on customs duty to imposed on several parts of mobiles. “Domestic electronic manufacturing has grown rapidly. We are now exporting items like mobiles and chargers.
Mobile Phones to See Another Round of Price Hike in India
“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%,” said Ms Sitharaman.
These new rates will be applicable on inputs, parts as well as sub-parts for the manufacture of specified parts of mobile phones such as the Printed Circuit Board Assembly (PCBA), camera modules and connectors.
The rate of customs duty levied on Printed Circuit Board Assembly [PCBA] of chargers or adapters has been increased from 10% to 15%, stated the government. The Finance Minister also said that Centre was Cutting Basic Customs Duty rate on nylon chips & nylon fibre.
To add to the list of changes, the Budget also proposed an increase of the customs duty on parts of mobile chargers from Nil to 10 per cent. The new rates will come into effect from April 1, 2021. This change is likely to affect the prices of smartphones, with a hike strongly expected from most, if not all smartphone manufacturers.
“The customs changes are in line of what was expected with two key focus areas, ie, ease of doing business by way of reiteration of streamlining of customs processes and “make in India”, by way of increase in duties on those products/ components that there is a push for manufacture in India.
These rate changes seem aligned to those sectors where the PLI schemes have been announced, eg, solar, auto components, mobile parts and steel,” stated Mr Mahesh Jaising, Partner, Deloitte India.
He explained that this move was in line to encourage the setting-up of an entire ecosystem of mobile manufacturing within India, which should encourage indigenous manufacturing but, he cautiously added that there will be an increase in cost in short term basis.
“On one front, this should encourage and give impetus to the indigenous manufacturing and also position India as a formidable Mobile Phone manufacturing hub.
However, on an immediate basis, until there is an ecosystem of manufacture of these components, we may observe an impact of incremental cost on manufacturers of mobile phones on a short term basis and the same may have an impact on the pricing,” Jaising said.