All the smartphones and TVs which are shipped to India at the moment attract high basic customs duty (BCD). This is not just to increase the cost for the end Indian consumer, but to protect the local producers. The local Indian producers are said to be currently at capacity building stage right now so that they can also manufacture smartphones and its components. The placement of higher BCD protects them marginally. But this protection is not going to be there for long. As per a report from Mint, the government is looking to introduce an end date for the higher BCD. More on the story ahead.
Government Aiming to Raise Capacity of Domestic Electronics Industry
BCD on both mobile handsets and television is 20% currently. Even for companies who want to manufacture locally such as Apple, many of the components of the smartphone attract a BCD of 15%-20%. The government from October 1, 2020, also imposed a 10% customs duty on display parts and touch panels of the smartphone as well.
For the unaware, BCD is an extra tax which is put on top of all the indirect taxes on the imported products and materials. This makes it expensive for the end-users to buy as well the company to manufacture its products in India.
However, the government might remove the higher BCD that is imposed on mobile handsets and TVs. This is because the higher BCD is said to be only temporary protection and not a permanent measure. Mint highlights that India wants to portray itself as an open economy and the elimination of tariff measures will send positive signals to the world.
With enhancing and motivating local production, the Indian government is seeking to scale up its domestic electronics industry to $400 billion in FY25 from $59 billion in FY18. The US and some other countries have already complained about the high tariffs that India is imposing on the technology products said to be against the principles of the Information Technology Agreement (ITA).