Rise in customs duty to make Indian-made mobiles costlier

Indian mobile handsets are likely to become costlier as the government intends to levy basic customs duty on the components that are so far imported free.

Imported handsets have already become costlier due to a hike in the customs duty to 20 per cent from 15 per cent in the Union Budget.

The Ministry of Electronics has pushed for imposing the duty also on the mobile components in an internal memo to the Finance Ministry. It will increase the price of the sets produced in India.

The duty that the ministry seeks to be clamped on the components include the populated printed circuit boards (PCBs) which account for almost half of the manufacturing cost of mobiles. Other components that are inviting higher customs duty are camera modules and connectors.

Mobile phone makers in India currently only assemble handsets using the imported components and they will not be able to absorb the levy on the components that so far came without any duty.

The government will justify the levy as an exercise to encourage local component manufactures to boost the government’s Make in India resolve, but those in the industry say it may take long time before the facilities come up in India to produce the components, forcing the Indian manufacturers to import them.

To promote more penetration of the mobile phones in the country, the government was not imposing any import duty on the mobile phones of the foreign make until last July when a 10 per cent import duty was slapped and increased to 15 per cent in December and further raised to 20 per cent in the Union Budget.