Gene has come out of the lid. Yes, the first budget after the ambitious Goods and Service taxes has been presented in the parliament by our esteemed finance minister of India Mr Arun Jaitely. Well, the first news which we are getting from New Delhi is not quite good and expected. Prices of imported mobile phones (mainly Apple and Google) are expected to rise by 3-4% as the government plans to increase the customs excise duty from 15% to 20%.
On the other hand, mobile phones produced in India will be available at a cheaper rate. The hike in customs duty will be around 20% on handsets and 15% on imported accessories; this will be most likely to have an impact on tech giants like Apple and Google, who does not have an R&D hub in the country. As of now, Apple import its handset from China, hiking the duty will pressurize Apple to shift its focus to India as it is one of its major cash cows.
Another tech giant to be affected by the hike will be Google, as it is import all its Pixel smartphones. The hike is expected to boost the production of mobile phones manufactured in India as they will try hard to fill the gap. This policy will indirectly benefit the companies who have manufacturing hubs in India. The hike is expected to project India as a manufacturing hub to the world.
In addition to the hike in excise duty for mobile phones, they have also increased the import duty on printed cellular circuits and Li-ion batteries (from 7.5% to 15 %) used in mobile phones.
Indian smartphone makers have welcomed the increased import duty saying that it will project India as a manufacturing hub to the whole world. We have to wait and see how much it is going to affect the market base of tech giants who are importing most of their gadgets to India.
Here are the few responses from important person after the big news started rolling out.
Pankaj Mohindroo, president of the Indian Cellular Association that represents several handset makers including Apple.
“The Indian government is relentlessly pursuing curbing imports and building value addition in the country. At these levels of import duty, import is no longer a viable option,”
Bipin Sapra, head of indirect tax at consultancy EY had the following to say about the budget:
“The increase in customs duty on mobile phones would incentivize manufacturing of smartphones in India. In the short run, the prices of phones may go up but in the long run, there would be an incentive to manufacture the entire supply chain in India, given the duty on components too.”
Sanjeev Agarwal, chief manufacturing officer at Lava International had this to say:
“Local manufacturing will create more job opportunities, benefitting the youth and contributing towards the overall growth of the economy.”