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Budget 2016: Mobile phone, tablet prices may rise 5% post duty rejig

Date 29-Feb-2016
Subject Budget 2016: Mobile phone, tablet prices may rise 5% post duty rejig

NEW DELHI: Mobile phones and tablets prices are set to rise about 5% after the government proposed to levy special additional duty on components such as populated printed circuit boards PCBs) and basic customs and countervailing duties on batteries, chargers, headsets and speakers.

"Customs and excise duty structure plays an important role in incentivizing domestic value addition towards Make in India campaign of our Government," finance minister Arun Jaitley said Monday in his Budget proposals.

"In line with that, I propose to make suitable changes in customs and excise duty rates on certain inputs, raw materials, intermediaries and components and certain other goods and simplify procedures, so as to reduce costs and improve competitiveness of domestic industry in sectors like information technology hardware, capital goods..." he said.

The Union Budget has proposed a 2% special additional duty (SAD) on populated printed circuit boards (PCBs) used for making mobile phones, laptops and personal computers, a proposal that hasn't gone down well with handset makers that import this component for making phones locally.

"Populated PCBs are roughly half the cost of a phone... any increase in cost will get passed onto consumers," said Pankaj Mohindroo, president of the Indian Cellular Association, which represents handset maker in India.

"This is a downright negative move," he said.

Hari Om Rai, co-chairman of the government backed Fast Track Task Force and chairman of Lava International said that the "industry was unhappy" with the changes and prima facie, "prices of handsets and tablets will rise by 5%."

"The imposition of 2% SAD means that duty differential between complete mobile phones and its parts or components for manufacturing will be significantly diminished. India has not yet developed the eco-system for the complexity involved in populating a mobile phone bare PCB," he added.

The Union Budget has also proposed to withdraw Basic Customs Duty (BCD) and Countervailing duties (CVD) exemptions on imports of chargers, adapters, battery, wired headsets and speakers used in mobile phones. With a BCD of 10%, CVD of 12.5% and SAD of 4%, the total duty cost comes to be 29.44%, making the imports of these products that much expensive.

"This is a very steep increase," Mohindroo said, adding that in comparison, making these products locally attracted excise duty of only 2%. "In the long term, a separate industry worth Rs 7,000-Rs 10,000 crore will be set up here? by 2018."

The impact will be on the negative side in the short term, as the cost of the components put together is about 35% for featurephones, compared to 10% in smartphones. Therefore, prices of featurephones may rise more than that of smartphones in the immediate future, the ICA added.

The association will request the finance ministry to make the changes applicable from June 1, 2016, and from September 1, 2016 especially in case of manufacturing of batteries.


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