The government has announced some concessions in custom duty on certain mobile phone components in spite of which it is very unlikely that the prices of the handsets will witness any major decline. According to the Industry experts, these concessions will instead provide the original equipment manufacturers (OEMs) with a cushion allowing them to absorb other expenditures related to component shortage and supply chain issues.
The Changes in Basic Customs Duty and its Effects
According to Techarc founder Faisal Kawoosa, the decline in BCD or Basic Customs Duty on some particular components will provide OEMs with some cushion to counterbalance the rising prices of some of the major components such as chipsets and displays used in the handsets. Therefore, the handset prices might not actually have any impact and are likely to remain the same.
A government notification informs that the BCD rate on camera lens for use in the production of the camera module of cellular mobile phone is being dropped from 15%/10% to 2.5% which will be in effect from February 2, 2022. The notification further added that the BCD rate on particular parts of transformers for use in the production of chargers or adapters are being dropped down from 10%/15% to 5% also effective from February 2, 2022, and the concessional rate will be valid till March 3, 2024.
For those unaware, the telecom sector has been going through issues of supply chain and component shortage and the introduction of concession on component duties will ensure a boost to the manufacturing of the devices. The finance minister Nirmala Sitharaman in a statement said that in order to facilitate manufacturing of wearable devices, audio devices and electronic smart meters, concessions are being introduced on custom duty for the parts of the transformer of mobile phone chargers, camera lens used in the production of mobile phones and other similar items. She added that this will ensure high growth in the domestic manufacturing of electronic items.
According to the leading industry body, Cellular Operators Association of India (COAI), the high customs duty was causing hindrances to the cost efficiency of the telecom companies in the country. The association estimated that about 85% of equipment related to telecom in the country is imported on which BCD of 20% is levied.