Mobile handset prices likely to rise by 2-7% due to customs duty hike
The mobile phone market pundits believe the impact of the Union Budget for the year 2020-21 may witness an increase in retail prices of the devices by around 2% to 7%. The government has been consistently sending out the message over the last few years that the mobile brands will have to start manufacturing their phone models within the country if they want to enjoy any price advantage. The import duty structure has been built in a way where fully assembled phones will attract the highest rate of import duties while the components will be taxed at a lower percentage.
In the latest budget, the government has raised the duty on mobile chargers from 15% to 20%. Motherboards and printed circuit board assemblies (PCBA) will now be taxed at 20%, double the current rate of 10% when imported.
The general impression among the experts in the area is that these changes may not have a huge impact since the number of phones in the top category within the overall product mix is very small, not more than 3-3.5%. These are typically selling at ₹40,000 or more. Most mid-segment phones are made in India. There may be odd cases where the component sourcing may not be still fully indigenised, leading to a higher cost now for them, when the new duty structure gets implemented. Some say the feature phone manufacturers, or whatever is left of it, may suffer due to the increase of import duty on PCBA.
The main competition for the Indian manufacturers comes from countries like Vietnam besides China and they have to keep looking at their cost sheets to remain competitive.
With as much as 97% of the mobile phones sold in the country being made locally, the long-term impact of these changes on the import duty structure will be negligible.