Govt slashes import duty on smartphone components to 10% ahead of Budget

According to a notification by the Ministry of Finance – a day ahead of this year’s Budget – the basic customs duty (BCD) has been rationalised on inputs of mobile phone for the following: mechanics and die cut parts to 10 per cent, and all others inputs of mobile phones classified as ‘others’ under HSN code 85177990 has been adjusted to 10 per cent. Further, there will be no duty on inputs of mechanics and die cut parts.

It is worth noting that the BCD on the ‘others’ category was earlier raised from 5 per cent to 15 per cent in 2018 under the Phased Manufacturing Programme (PMP).

The components on which the import duty has been slashed to 10 per cent include battery cover, front cover, middle cover, main lens, back cover, and GSM antenna/antenna of any technology among other things.

IT Minister Ashwini Vaishnaw said, “This rationalisation of custom duties brings much needed certainty and clarity for the industry and in customs processes”. Minister of State for Electronics and IT Rajeev Chandrasekhar said on X, “Reduction in certain input tariffs and rationalisation will help reduce costs, advance ease of doing business, and catalyse export led manufacturing”.

Amid US-China tensions, India is potentially the only country which provides a big internal market and a massive, educated labour force to produce devices for export.

“The adjustment of BCD to 10 per cent on parts of mobile phones and mechanics and die-cut parts and 0 per cent on inputs of mechanics represents the start of a paradigm shift in the policy orientation of the government towards export-led growth and competitiveness,” said Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA), which represents major smartphone manufacturers like Apple.

Tarun Pathak, research director with Counterpoint, said: “This will benefit the OEMs in reducing the cost, which will, in turn, be passed on to the end customer in the near term. This move can help to drop smartphone prices by 3-5 per cent, empowering the consumers and making the devices affordable, especially in the entry and budget segments.

However, the think tank Global Trade Research Institute (GTRI) said that the changes “will have no impact on improving export competitiveness of mobile phones made in India as all inputs, parts, and components used in the making of mobile phones for exports can already be imported at zero duty under various government schemes… Firms like Apple use these schemes. The government should watch out if the benefit of duty cuts are passed to domestic mobile phone buyers through price cuts”.

In a report released earlier this month by the ICEA, the industry lobby group had called for a sharp cut in tariffs on components and sub-assemblies for boosting smartphone exports from India, adding that the country has the highest tariffs on inputs compared to seven countries, including Vietnam, China, and Mexico.

Mobile phone exports from India promise to be the next big milestone for smartphone makers. The ICEA report had said that mobile phone exports from the country are expected to hit 30% of the total production of $49-50 billion in the current fiscal, but that requires matching China and Vietnam’s competitive tariff regime in addition to other factors which impact competitiveness.