GTRI urges not to cut import duty on smartphone parts
NEW DELHI: Economic think tank GTRI on Monday urged the government not to cut import duty on smartphone components in the Budget as it could lead to an increase in superficial assembly plants that rely heavily on imported parts.
Finance Minister Nirmala Sitharaman will present the Union Budget for 2024-25 tomorrow.
The Global Trade Research Initiative (GTRI) said the current schemes and tariff structure resulted in great success, and the current framework is also ensuring duty-free imports of components for exports.
“Do not cut import duty on smartphone components in this
Budget. Removing tariffs could lead to an increase in superficial assembly plants that rely heavily on imported parts, contributing little to the local economy. “Imported components and subassemblies account for up to 90% of the bill of material value for an India-made phones,”
GTRI Founder Ajay Srivastava said.
Currently, import tariffs on the product is 20% while duty on components range between 0 and 20%. The Budget should maintain these tariffs for several compelling reasons, he said.
“Smartphone is the most celebrated success story pushed by PLI (production linked incentive) incentives and a clever tariff arbitrage between these phones and its components,” he added.
India’s production of this item has crossed $49 billion in FY24, and its exports grew from $10.96 billion in FY23 to $15.57 billion in FY24, a growth of 42%.
Additionally, over 98% of smartphones sold in India are made locally, demonstrating the success of policies like the PLI scheme, which offers a 4-6% cash incentive on annual incremental production. No need to change a policy giving great results, it said.
The GTRI added that Indian manufacturers can import necessary inputs or capital goods duty-free for manufacturing and exporting electronic items, facilitated through schemes like Advance Authorisation, Export Promotion Capital Goods, Special Economic Zones (SEZs), and 100% Export Oriented Units. Firms can also use the customs bond scheme for dutyfree imports without localisation requirements.
“Apple, for example, through its contract manufacturers Foxconn and Wistron, benefits from SEZs to manufacture and export smartphones. In 2023, Apple’s iPhone production in India exceeded ₹1 lakh crore (about $13.5 billion), with ₹65,000 crore worth of exports,” the think-tank said.
Schemes like SEZs thus allow import of all inputs at zero duty, thus making Indian smartphone globally competitive, it added.