Thursday’s partial rollback of import duties levied on mobile handset components in the budget might induce manufacturers to set up local assembly units, but it could further delay the desired manufacturing ecosystem in India.
The finance ministry lowered the total import duty on mobile handset components like adaptors, chargers, battery and earphones to 12.5 per cent. Earlier, in the budget for 2016-17, the government had raised the total import duty to 29.44 per cent from zero.
As a result of the duty announced in the budget, importing these products had become costlier by up to 9.5 per cent. Handset manufacturers, however, could not pass on the additional cost to consumers because of the price sensitive Indian market. Sanjay Garg, partner, indirect tax, KPMG in India, said the rollback would make imports more attractive and discourage local manufacturing of components. “It was done to give the assemblers here a breather,” he added.
The budget decision would have encouraged local manufacturing of components and the cuts were due to pressure from the industry, he added. “A manufacturing ecosystem that will include component manufacturing is still a few years away,” said Syed Tajuddin, chief executive, Coolpad India. “Most companies now manufacture handsets locally and the higher import duty on components was exerting pressure on profit margins,” he added.