Arun Jaitley, India’s Finance Minister presented the Union Budget 2018 today. The expectations were huge because it is the last budget of the Narendra Modi Government before the upcoming general elections in 2019. In a bid to boost Make in India initiative, the Government has hiked the customs duty of imported smartphones to 20%. Moreover, the duty for the electronic components is also increased to 15%. The main idea behind the hike is to encourage local manufacturing and also to get more employment opportunities.
The increase in customs duty of phones will directly impact Apple, Honor and other manufacturers who import smartphones from outside India. It will force companies to migrate their production facility to India. Currently, popular companies have shifted the manufacturing process of phones under Make in India initiative.
Responding to media, Bipin Sapra, head of indirect tax at consultancy EY disclosed that the sharp increase in customs duty on smartphones and other phones would certainly provide incentives for the companies to manufacture their devices in India. Even though the prices of mobile phones would increase initially, the cost will come down if the companies establish their unit in India.
The increase in customs duty assumes great importance since the Government imposed a 10% duty in February 2017 and increased to 15% in December. Meanwhile, the Government also introduced import duty on printed circuit boards, camera modules, and connectors including components used for the manufacture of smartphones.
It remains to be seen as to whether companies will migrate to India if the customs duty of mobile phones is hiked. It seems that the finance minister is adopting an old school principal tactics. Naturally, all companies based in the China and Taiwan would not be in a position to migrate to India because of the lack of skilled manpower.
There are reports that Lava is gearing up to assemble PCBs in India from March 2018 to leverage the benefits of the duty and exemptions under Make in India initiative.
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