Union Budget 2025-26: Govt scraps import duties on smartphone sub-parts in push for local manufacturing

The basic customs duty (BCD) rates levied on these parts was 2.5 per cent earlier, but the tax has now been removed. BCD is an indirect tax that is levied on imported goods and it is usually calculated based on the assessment value of the product. It can vary from zero to hundred percent depending on factors such as the HSN code of the product as well as the country from which it is imported.

The move to axe the import duties on these parts could benefit smartphone manufacturers such as Apple and Xiaomi. The BCD exemptions could also help lure global tech companies to manufacture in India amid brewing trade tensions between the United States of America and China.

India is the world’s second-largest mobile phone manufacturer, domestic electronics production more than doubling in the last six years to $115 billion in 2024. Apple led the smartphone market in India in 2024 at a 23 per cent market share, followed closely by Samsung with a market share of 22 per cent, according to research firm Counterpoint.

Welcoming the Budget announcement, Arijeet Talapatra, CEO of itel and Tecno, said that the proposed custom duty reforms “will improve cost efficiencies, accelerate localization, and strengthen the Make in India initiative.”

“This move strengthens India’s position in the global supply chain, especially amidst shifting trade dynamics amongst major economies,” he said.

As part of the Union Budget 2025-26 production-linked incentive (PLI) schemes worth Rs 8,885 crore have been allocated for large-scale electronics manufacturing, with PLI schemes of Rs 115 crore directed towards manufacturing IT hardware.

Revised BCD rates for other IT hardware

During her budget speech, Sitharaman proposed to hike the BCD on Interactive Flat Panel Display (IFPD) from 10 per cent to 20 per cent.

Increasing BCD rates can also encourage domestic production as it would make imported goods more expensive and locally produced alternatives more competitive.

Meanwhile, the BCD on open cells used to manufacture IFPDs has been lowered from 15 per cent to 5 per cent. Additionally, the parts of the open cells used to manufacture the panels in LED and LCD TVs have been fully exempted from the custom duty.

Commending the government on these moves, Rahul Sharma, the co-founder of Micromax Informatics, said, “Customs duty reforms—such as exemptions on LED components and a 2.5% BCD relief on smartphone imports—will lower manufacturing costs, encourage domestic production, and make advanced technology more accessible.”

“We fully support these progressive policies and remain committed to leveraging them to drive innovation, enhance production capabilities, and contribute to India’s economic growth,” he said.

The BCD on Carrier Grade ethernet switches are also proposed to be reduced from 20 per cent to 10 per cent, making it at par with BCD on Non-Carrier Grade ethernet switches and preventing classification disputes.

“The government’s reduction in import duties on key components in the electronics sector, coupled with the attractive PLI scheme for the hardware industry, will significantly strengthen production capabilities in India in the short run,” Ashok Rajpal, Managing Director, Ambrane India, said.

“Additionally, with the planned roadmap focusing on long-term growth, including substantial investments in semiconductor manufacturing and the launch of the National Manufacturing Mission, we are optimistic about the future of the manufacturing sector in India,” he added.

In the interim Union Budget 2024-25 announced last year, the government had sought to reduce the BCD rates on imported mobile phones, mobile printed circuit board assembly (PCBA), and mobile chargers from 20 per cent to 15 per cent.