Government of India triggers shock treatment to Apple and China with hike in import tax

In a shocking development, Government of India under the leadership of Prime Minister Narendra Modi has increased the import duty of electronic items including smartphones from 10 to 15 percent. The move will severely affect the prospects of Apple since the company mainly imports iPhones, MacBooks and other devices directly from China and Vietnam.

According to a statement released by the Government, the import tax on a wide range of electronic products such as smartphones, televisions have been increased to boost manufacturing in India under Make in India initiative. The officials are of the opinion that increasing import tax to 15 percent will curb supplies from overseas countries.

With the increase of import tax to 15 percent, it will be difficult for Apple to import smartphones such as iPhone 8, iPhone 8 Plus and iPhone X. The company will increase the prices of these expensive smartphones or compelled to establish their own manufacturing plant in India. The overall revenue growth of the Apple is drastically slowing down in India because of the intense competition between various brands.

Commenting on the development, Pankaj Mohindroo, Indian Cellular Association president disclosed that the tax hike will heavily boost domestic companies who are manufacturing 500 million smartphones. The data sourced from the Counterpoint Research reveals the stunning fact that eight of the 10 smartphones sold in 2017 will be manufactured locally.

While Apple has started to assemble iPhone SE in India, Samsung has been manufacturing nearly 80% of the smartphones sold in India. There are reports that Apple is finding it difficult to establish a plant in India because the Government has declined to provide any incentives and tax relief for manufacturing the devices under Make in India initiative. The chances of providing any incentives are bleak.

Responding to media, Tarun Pathak of Counterpoint Research revealed that the new tax notification will hurt those companies who are widely dependent on imports. Apple is the worst hit since they import nearly 88 percent of its devices. The company has no way either to increase prices or to establish their own manufacturing plant.

In addition to smartphones, the Government also increased the import tax on video cameras to 15 percent and television sets to 20 percent. Interestingly, a high-level delegation of Indian telecoms equipment manufacturers met Finance Minister Arun Jaitley and sought measures to promote domestic industry in the upcoming budget.