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Phones, peripherals set to get cheaper after customs duty cut
Finance minister Sitharaman reduced customs duty on mobile phones, PCBAs, and chargers to 15%, exempted critical minerals from duties, and proposed further reductions to boost domestic electronics industry.
Finance minister Nirmala Sitharaman on Tuesday announced a slew of measures to strengthen India’s electronics industry that included reduced basic customs duty on mobile phones, mobile printed circuit board assembly (PCBA) and mobile chargers from 20% to 15% and increased the duty on PCBAs of some telecom equipment from 10% to 15%.
The budget also proposed to exempt 25 critical minerals and rare earth elements from custom duties and reduced the basic duty on two of them to secure their availability for strategic sectors such as telecommunications, electronics, energy, space, defence, renewable energy and nuclear energy.
“With a threefold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured,” Sitharaman said in her budget speech in Parliament. “In the interest of consumers, I now propose to reduce the BCD on mobile phone, mobile PCBA and mobile charger to 15%,”
To boost value addition in the domestic electronics industry, the government also proposed reduced BCD on oxygen-free copper used to manufacture resistors from 5% to nil, and BCD on specified goods for use in manufacture of connectors from 5% or 7.5% to zero.
Earlier this month, lobby group India Cellular and Electronics Association had asked the finance ministry to reduce input tariffs in the budget to reduce cost of production, increase local production of electronics and increase exports, especially given the lower tariffs and fewer slabs in countries such as China and Vietnam. It had wanted all tariff lines that raise costs significantly to be reduced to zero.
The association welcomed the budgetary announcements. “Our proposal for tariff slab rationalisation has also been acknowledged and the finance minister has announced that it will be taken up in the next six months. It will further embolden the industry and its competitiveness,” chairperson Pankaj Mohindroo said.
“We welcome the tariff concessions on majority of critical materials which are used in strengthening the semiconductor ecosystem. The concessions are provided to the extent of nil from existing BCD slabs of 10% to 2.5% depending on the different critical metals. We also welcome the rationalisation of tariff on silicon quartz, silicon dioxide from 5/7.5% to 2.5%. This is a crucial step to propel setting up a strong silicon and power semiconductor wafer production ecosystem in the country,” Mohindroo said.
“This is a good move by the government. It will discourage imports of PCBA that is ready made assembly and encourage local manufacturers to do in-house assembly of the PCB. PCB is the most important part of all telecom equipment. Hence, it will promote local manufacturing,” said NK Goyal, chairperson of the Telecom Equipment Manufacturers Association, which counts Tejas and Dixon as members.
“In the case of mobile phones, India is the second largest manufacturer in the world and we aim to become the first. A reduction in duties from 20% to 15% will result in increased manufacturing of mobile phones in India,” Goyal said.
On January 30, the finance ministry had reduced customs duty for certain goods that included SIM sockets, screws, battery covers, front covers, middle covers, main lens, back covers, GSM antennas, sealing gaskets and other mechanical items of plastic and metal that are used in manufacturing mobile phones from 15% to 10%. For other parts such as resin, mesh, adhesive and sponge, the customs duty was slashed to zero.
