Reversing the trend in Budget 2018, Union Finance Minister Arun Jaitley has increased customs duty on several imported products, a move that would adversely impact a segment of consumers.
The higher customs duty would make the products expensive. The Finance Minister also proposed to increase customs duty on mobile phones from 15% to 20%, on some of their parts and accessories to 15% and many other items.
The prices of imported high end mobile phones like iPhone would be costlier by 4 to 5%. In December, the government had increased customs duty on imported mobile phones from 10 to 15% and as a result, handset companies like Apple and others had increased the prices of phones by 3 to 3.5%. Now, with another round of customs duty hike, prices would rise further.
“Prices should go up but we are not going to pass on all the additional burden on consumers,” an official of a leading handphone company said.
“For high value products, a marginal increase of 3 to 5% hardly makes any difference and it will not deter me from buying my next high end imported phone,” said Ritu Sharma, an executive working in a finance company, reacting to the announcement.
Customs duty had also been increased on food items, electronics, auto components, footwear, perfume and furniture. Imported cars and motorcycles would also become more expensive.
Silver and gold would also become costlier. Also, prices of imported fruit juices, fruits and vegetables would rise.
Prices of sun glasses and truck and bus radial tyres would also go up. Diamond, imitation jewellery and smart watches would be expensive.
“While the intention behind increasing the customs duties on some products such as mobile phones is to incentivise domestic manufacturing, this will lead to an increase in the prices for these products, denting the middle class consumers wallets,” said M. S. Mani, senior director, Deloitte India.
“Customs duty rates on various products proposed to be increased would make domestic manufacturing of these products more attractive as compared to their imported counterparts,” said Rajeev Dimri, partner Deloitte India.
However, a few automakers were sceptical about the duty hike. “The increase in the basic customs duty of auto parts, accessories and CKD components varying from 5% to 10%, clubbed with the new social welfare surcharge at 10% at a time when the auto industry is reviving, is unfortunate, and comes as a surprise,” said Roland Folger, MD and CEO, Mercedes-Benz India.
“We believe it is going to impact the auto industry, the consumers,” Mr. Folger said adding, “The increase in basic customs duty will highly restrict the growth of the luxury car industry. Further, since the customers will be burdened with higher maintenance costs, it is likely that this duty hike may delay their routine servicing, thereby affecting safety and environment at large,” he said.
“We are disappointed with the increase in customs duty on cut and polished diamonds and cut and polished coloured gemstones from 2.5% to 5%,” said Pramod Agarwal, chairman, Gem & Jewellery Export Promotion Council (GJEPC).
“This move hampers India’s chances of becoming an international diamond trading hub. This move doesn’t provide India a level playing field vis-à-vis other peers such as Belgium, Dubai and Israel, ” he said.
Shriti Malhotra, chief operating officer, The Body Shop India said, “the hike in customs duty will impact the sector and consumer demand, but it is too early to understand the implications.”
