Mobile phones to get expensive as custom duty on components hiked by 2.5%

This morning, Finance Minister Nirmala Sitharaman delivered the 2021 Union Budget presentation in Parliament, unveiling key policy changes. Notably, the FM has raised custom duty on smartphone accessories, including chargers and specific sub-parts of mobile phone products. This strategic move aims to stimulate domestic manufacturing and enhance India’s position in the global technology and electronics industry. Also Read – Google Pixel 6 Pro: What to Expect from the New Custom Google Chip and Android 12

Mobile Components: Hike in Custom Duty

Specifically, the government has proposed a 2.5% increase in custom duty for printed circuit board assembly (PCBA)—commonly known as the motherboard—along with camera modules, connectors, and other components used in lithium-ion battery and battery pack manufacturing.

Additionally, the custom duty on PCBA for chargers will rise from 10% to 15% starting from February 2. These adjustments may lead to a marginal impact on smartphone prices, but they align with the broader goal of promoting local value addition and strengthening India’s manufacturing ecosystem.

In summary, the Union Budget’s focus on custom duty revisions underscores the government’s commitment to boosting domestic production while acknowledging the evolving landscape of mobile technology. As a result, consumers may experience a slight increase in smartphone costs, but this move ultimately supports India’s journey toward becoming a leading manufacturer and exporter of mobile phones.

• Moderate Custom Duty on Chargers and Mobile Phones

Sitharaman declares that some parts of mobile phones will now move from Zero to a moderate custom duty of 2.5%. The FM said, “Withdrawing exemptions on parts of chargers and mobile phones to boost local manufacturing of smartphones.” In other words, we can expect smartphone prices to rise marginally. Also Read – iPhone 13 OLED display manufacturing begins, Samsung and LG started their production line

During her announcements, The FM said “Domestic manufacturing is growing at a very rapid pace. We are now exporting different items like mobiles and its accessories including chargers.” On domestic manufacturing sector, the FM said that over the years domestic production has improved significantly. “Currently, We are in a state to export the mobiles and chargers to the world.” Sitharaman added.

She said “For enhancing the domestic production, 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 per cent.”

• New Schemes for Electronic Industry

The Indian government has launched the Production-Linked Incentive (PLI) scheme to bolster the electronics industry. This is particularly for the mobile phone manufacturing. Under the Phased Manufacturing Program (PMP), exemptions on mobile phone chargers and other components will be withdrawn to facilitate PLI expansion.

Domestic companies like Lava, Micromax, and iTel have obtained licenses for mobile phone manufacturing within this framework. Also Read – Realme India plans to manufacture laptops and tablets locally in Noida by 2023: Reports

1. Production-Linked Incentive (PLI) Scheme:

   • The PLI scheme is a strategic initiative by the Indian government to encourage domestic production and boost the manufacturing sector. It aims to attract investments, create jobs, and enhance India’s self-reliance in critical industries.
   • Under this scheme, eligible manufacturers receive financial incentives besides custom duty. The incentives are directly linked to the value of goods produced, encouraging companies to scale up their manufacturing capabilities.
   • The electronics sector, including mobile phones, has been a focal point for PLI implementation. By incentivizing local production, the government aims to reduce dependence on imports and strengthen India’s position in the global supply chain.

2. Phased Manufacturing Program (PMP):

   • The PMP is a strategic roadmap designed to promote indigenous manufacturing by gradually reducing import reliance. It identifies specific components and sub-assemblies that can be manufactured domestically.
   • As part of the PMP, the government has decided to withdraw exemptions on certain mobile phone components. These include items like printed circuit board assembly (PCBA), camera modules, and connectors.
   • By narrowing the scope of custom duty exemptions, the PMP also encourages manufacturers to produce these critical components within India, fostering local value addition.

3. Custom Duty Revisions:

   • Effective from February 2, the custom import duty on PCBA for chargers will increase from 10% to 15%. This move aligns with the broader goal of promoting domestic manufacturing and discouraging imports.
   • The adjustment may have a marginal impact on smartphone prices, but it reflects the government’s commitment to building a robust manufacturing ecosystem. Also Read – Samsung at MWC 2022: Galaxy Book2 Pro, Galaxy Book2 Pro 360 launched

4. Licensed Domestic Manufacturers:

   • Companies like Lava, Micromax, and iTel have obtained licenses under the PLI scheme. These licenses empower them to engage in mobile phone manufacturing, contributing to India’s economic growth and technological advancement.

In summary, the PLI scheme, coupled with the PMP and custom duty revisions, sets the stage for India to emerge as a leading player in mobile phone production. While consumers may witness slight price fluctuations, the long-term benefits lie in a stronger, self-reliant electronics industry that drives innovation and job creation.

Price Hike on Mobile Components

The new prices shall apply to the manufacture of inputs, parts or sub-components, including:

• Printed Circuit Board Assembly (PCBA)
• Module of camera
• Connectors

The Indian government has recently implemented changes in customs duty rates for mobile phone components and accessories. Notably, the custom duty for Printed Circuit Board Assembly (PCBA) used in chargers or adapters has also been raised from 10% to 15%.

Additionally, the budget proposes to increase the custom duty on various mobile accessories, including mobile chargers, from nil to 10%. These adjustments will take effect from April 1, 2021 and are likely to impact the overall costs of smartphones. Also Read – Nokia PureBook Pro series laptop with Intel 12th Gen Chipset launched

• Change in Custom Duty on Other Electronic Products

Recent changes in customs duty rates extend beyond mobile phone components. Notably, these adjustments impact other essential parts as well. Also Read – OnePlus Unified OS to launch with OnePlus Pad tablet with Android 12L: Reports

• Refrigerator and Air Conditioner Compressors:

  1. The customs duty on these critical components has been revised upward. Previously at 12.5%, it now stands at 15%.
  2. This change aims to encourage local manufacturing and reduce reliance on imports for cooling appliances.

• Insulated Wires and Cables:

  1. These essential electrical components, crucial for various devices, will now also attract a 10% custom duty.
  2. Previously, the duty rate was 7.5%.
  3. The adjustment aligns with the government’s vision of promoting indigenous production and fostering self-sufficiency. Also Read – Boost to digital payments from Union Budget 2021