The Centre has increased customs duty on several electronic items including televisions, mobile phones and microwaves, making the import of these goods more expensive and thus lending a fillip to its ‘Make in India’ programme.
The custom duty on push button phones, including mobiles, and on smart electricity meters has been increased to 15%, from 10% now, as per a notification issued by the Ministry of Finance. The duty on products like monitors, projectors, water heaters, microwaves, TVs and lamps and light fittings has been doubled to 20%.
“This is a major policy shift from the Government, as the peak customs duty rate for many electronic products has effectively been increased from 10% to 15% or 20%,” said Pratik Jain, Leader - Indirect Tax, PwC India. “This seems to be with the twin objective of increasing revenue as well as to encourage more manufacturing and value addition in India.”
Mr. Jain said the duty increases had been made under “emergency powers” included in the customs laws, and could prompt manufacturers in other industry segments to push for similar protection from imports.
“Some announcements can be expected in the upcoming budget about these changes and policy direction in this regard,” he added.
Anwar Shirpurwala, Executive Director of MAIT, the IT hardware industry body, said the move was aimed at boosting domestic manufacturing and not at making products costlier. “There may be some impact on the prices of products that are imported... manufacturing infrastructure is being built in India and this move will help push it further.”
Likewise, Abhishek Jain, Tax Partner at EY India said, “To foster the national initiative of Make in India, the Government has raised the basic customs duty for various electronic products like mobile phones, microwave ovens, television sets, LED lamps, cameras. This would make import of these goods costlier and industry would be forced to explore domestic manufacture of these goods to reduce cost instead of importing these goods.”
Manish Sharma, President CEAMA and President and CEO, Panasonic India and South Asia said, “This shall not lead to major price hike as the duty structure for local manufacturing remains unchanged, but will boost indigenous manufacturing & generate more employment opportunities.”
‘Apple to be hit’
Meanwhile, Reuters reported that the rise in tax to 15% on handsets will make imports of phones — including most of Apple’s iPhone models — more expensive at a time the company’s revenue growth is slowing in India’s $10 billion smartphone market.
Pankaj Mohindroo, president of the Indian Cellular Association, said the increase will boost domestic manufacturers who are making about 500 million cellphones a year, more than double the output three years ago. Eight out of 10 phones sold in 2017 have been made locally, data from Counterpoint Research showed. Samsung assembles in India most of the handsets it sells in the country.
Apple currently only assembles its iPhone SE models in India and imports others. The company has sought a range of incentives and tax relief from the government for it to expand its manufacturing in India, but government officials have said they are unlikely to make exemptions for Apple.
Tarun Pathak, an associate director at Counterpoint Research, said the tax notification, will impact mobile phone companies dependent on imports.
“It will impact Apple the most as the company imports 88% of its devices into India. Either this will lead to increase in iPhone prices or force Apple to start assembling more in India.”
Aside from cellphones, the government also raised the import tax on video cameras to 15 % from 10 % and doubled the one on television sets 20 %, its statement said
On Monday, a delegation of Indian telecoms equipment manufacturers met Finance Minister Arun Jaitley, seeking government help to promote the domestic industry while he prepares the budget for 2018/19.
India’s goods imports in the seven months ending October rose 22 % to $256.4 billion from a year earlier, raising concerns among policymakers.
