Union Budget 2018 Impact on Smartphones
The national government has introduced its 5th and last full-fledged Union Budget in Lok Sabha on 1st February. All the people of India were looking at Union Budget with lots of hopes. The Union Budget was having a lot of importance as it was introduced after two big financial decisions made in NDA government Demonetization and GST. All the sectors were expecting some specific statements on their respective sectors. After introduction of Union Budget, everybody focuses on analyzing the budget impact on their sectors. Here we are going to focus on the impact of union budget 2018 on smartphones.
In the Union Budget 2018, the government has increased basic customs duty to 20%, due to this the prices of imported smartphones will rise up to 4%. However industry experts believing that overtime the prices might stabilize as local production is expected to increase to 90% as most of the companies will assemble phones locally. The raise of custom duty is likely to impact imported smartphones from iPhones to Google phones. Most of the mobiles are imported from China and US, and may force them to consider manufacturing more number of models in India. 75% to 80% of the phones sold in India are locally made; as most of the companies are working here prefer to locally to take an advantage of the duty difference against imports.
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In the short period of time, the imported smartphones can go up by 3-4% but in the long run there would be an incentive to manufacture the entire chain in India. The increase in taxes on mobile phones would incentivize manufacturing of these smartphones in India; though the value adding in India may continue to be lower. The customs duty increase would be the third time in the last 12 months. In February 2017, the government executed a 10% import duty which it increased to 15% in December 2017, and now to 20%.
Handset manufacturers welcoming the decision of increasing customs duty. Manufacturing smartphones locally, will lead to create more job opportunities which benefiting the youth and contributing towards the overall growth of the economy. In the Union Budget government announced, the government increased import duty on charger, adapters, battery packs, microphone, wired headsets, keypad, antenna, sidekeys, USB cables, from 7.5% or 10% to 15%. The government also imposed 10% import duty on printed circuit board (PCBs) of chargers.
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Pankaj Mohindroo, the president of the Indian Cellular Association that signifies several handset makers including Apple, stated that prices for feature phones are likely to increase by 1-2%, and the effect on smartphone prices is likely to be less than 1%. There will be marginal increase in mobile phone prices since 81% of volume and 84.5% of value is manufactured in India and we will cross 90% in 2018. Most importing companies are setting up manufacturing in India.
There could be changes in the customs duty instructions to make India a manufacture hum rather than assembly unit. Therefore the individual components may become expensive and finished goods may face low import duty. There is a possibility to rise further. However, tax experts feel that this is not a good move.
