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Budget 2021: Smartphones may get expensive as government removes exemption on parts of chargers, mobiles

 

Smartphones may get expensive in the coming months as the government has decided to remove exemptions on parts of chargers and mobiles in a bid to promote local manufacturing.



HIGHLIGHTS

  • Government removes exemption on parts of mobile phones.
  • Changes to come into effect from April 1, 2021.
  • New rates will make smartphones expensive.

Smartphones may get expensive in the coming months as the government has decided to remove exemptions on parts of chargers and mobiles in a bid to promote local manufacturing. The announcement was made in Budget 2021 speech by finance minister Nirmala Sitharaman. The new Budget proposes an increase from 0 to 2.5 per cent on customs duty to imposed on several parts of mobiles.

“Domestic electronic manufacturing has grown rapidly. We are now exporting items like mobiles and chargers. For greater domestic value addition, we are withdrawing a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobiles will move from ‘nil’ rate to a moderate 2.5%,” the finance minister said during her Budget Speech.

The new rates will be applicable on inputs, parts or sub-parts for manufacture of specified parts of mobile phones, including:

Printed Circuit Board Assembly (PCBA)

Camera module

Connectors

The rate of customs duty on Printed Circuit Board Assembly [PCBA] of charger or adapter has been increased from 10% to 15%, the government said. Meanwhile, the FM said that the Centre was Cutting Basic Customs Duty rate on nylon chips & nylon fibre. Along with this, the Budget also proposes to increase the custom duty on parts of mobile chargers from Nil to 10 per cent. The new rates will come into effect from April 1, 2021. These are likely to have a direct impact on the prices of smartphones which can increase in future.

“The customs changes are in line of what was expected with two key focus areas, ie, ease of doing business by way of reiteration of streamlining of customs processes and "make in India", by way of increase in duties on those products/ components that there is a push for manufacture in India. These rate changes seem aligned to those sectors where the PLI schemes have been announced, eg, solar, auto components, mobile parts and steel,” Mahesh Jaising, Partner, Deloitte India explained.

He further explained that the move is in line to encourage the setting-up of entire ecosystem of mobile manufacturing within India and should encourage indigenous manufacturing but added that there will be an increase in cost in short term basis.

“On one front, this should encourage and give impetus to the indigenous manufacturing and also position India as a formidable Mobile Phone manufacturing hub. However, on an immediate basis, until there is an ecosystem of manufacture of these components, we may observe an impact of incremental cost on manufacturers of mobile phones on a short term basis and the same may have an impact on the pricing,” Jaising said.

He further explained that the move is in line to encourage the setting-up of entire ecosystem of mobile manufacturing within India and should encourage indigenous manufacturing but added that there will be an increase in cost in short term basis.

“On one front, this should encourage and give impetus to the indigenous manufacturing and also position India as a formidable Mobile Phone manufacturing hub. However, on an immediate basis, until there is an ecosystem of manufacture of these components, we may observe an impact of incremental cost on manufacturers of mobile phones on a short term basis and the same may have an impact on the pricing,” Jaising said.

A change in custom duty has also been announced on other parts such as Compressor of Refrigerator/Air Conditioner which will now have 15% rate instead of the earlier 12.5%. Similarly, specified insulated wires and cables will attract 10% custom duty against the earlier 7.5%.

Source: shorturl.at/kqEH9

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