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Local phone manufacturing to get a boost with 10% customs duty

LiveMint logoLiveMint 01-07-2017 PTI

New Delhi: “Make in India” will get a push with the government’s latest move to impose a 10% basic customs duty on mobile phones imported into the country.

The levy is also applicable on parts like chargers, headsets, batteries and USB cables, with immediate effect. “The duty differential earlier was about 11.5% in favour of local manufacturing. But with the goods and services tax (GST) subsuming SAD and countervailing duties, that benefit was taken away. The 10% customs duty will help push local manufacturing once again,” Intex chief financial officer and director, Rajeev Jain, said. With this, status quo will be maintained (in favour of domestic manufacturing), he added. The announcement on the duty came in simultaneously with the midnight roll-out of the GST on the intervening night of 30 June and 1 July.

Many phone makers who assemble their devices at facilities in the country also import small quantities of phones from countries like China. “The (import) quantities, at least for us, is very small and therefore, the customs duty will not make much difference. For the end-customer, there is no impact as he or she pays 12% GST for the handset,” Jain explained. The government , however, has kept certain parts like printed circuit board assembly (PCBA), camera module, touch panel, cover glass assembly, vibrator motor and ringer, out of the levy of basic customs duty.

Echoing a similar view, BMR Advisors partner Mahesh Jaising said till Friday, companies importing handsets were of the view they would have benefited under GST, given the manufacturing duty differential scheme going away. “Consequently, consumers were expecting (prices of) imported phones (typically the high end phones which are usually imported) to have come down. However, with the 10% customs duty last night, the tax structure is again in favour of local manufacturing,” he added. Incidentally, telephone bills of consumers will go up under the GST regime, while prepaid customers are getting lesser talktime than before.

This is because, under GST, telecom services are being taxed at 18% compared to 15% earlier. Users are now getting talktime of about Rs80 on a recharge of Rs100, compared to about Rs83 earlier. Similarly, costs for postpaid users will also go up to the extent of three percentage points, starting this month. So, for a monthly usage of Rs1,000, users will have to pay Rs1,180 instead of the earlier Rs1,150. With the GST rolling out at midnight, some consumers faced issues getting recharges in the early hours of Saturday.

Some retailers complained of slow recharge processing initially but these issues seemed to be ironed out as the day progressed.

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