Here's How Govt Slashed Import Duties to Boost Mobile Phone Manufacturing
Here's How Govt Slashed Import Duties to Boost Mobile Phone Manufacturing

In a move aimed at boosting local manufacturing, the government has lowered the import duty on components used in making mobile phones. The import duty, which previously stood at 15%, has now been reduced to 10%.

The components affected by this reduction include various parts essential for mobile phone assembly such as battery covers, front covers, middle covers, main lenses, back covers, GSM antennas, PU cases, SIM sockets, screws, and other mechanical items made of plastic or metal.

This decision comes amidst differing opinions within the industry. The Global Trade Research Initiative (GTRI) had advised against cutting import duties, arguing that the existing tariff structure has already proven successful in fostering local manufacturing. They emphasized the importance of maintaining these rates to ensure a balanced growth of the industry.

However, the India Cellular and Electronics Association (ICEA) had advocated for import duty cuts, suggesting that it could significantly increase domestic production of handsets, boost exports, and support indigenous manufacturing.

The GTRI highlighted the importance of duty exemptions for exported smartphones while emphasizing the need for local manufacturers to pay duties for phones sold within India. They also mentioned existing schemes like Advance Authorisation and Export Promotion Capital Goods that facilitate duty-free imports for manufacturing and exporting electronic items.

According to GTRI's report, India's smartphone industry has witnessed substantial growth, with exports reaching USD 13.9 billion in 2023. The success of initiatives like the Production Linked Incentive (PLI) scheme, which offers cash incentives for incremental production, has played a crucial role in this growth.

The report also raised concerns about the rising import bill of electronic components, suggesting a high reliance on imported parts in local manufacturing. While acknowledging the potential for increased value addition through local production, the GTRI warned against cutting import duties, which could disincentivize deep manufacturing operations in India.

In the past, tax policies aimed at promoting manufacturing had attracted firms to assemble smartphones using imported kits. However, the introduction of GST in 2017 eliminated tax arbitrage opportunities, leading to the disappearance of many such firms.

The government's decision to reduce import duties on mobile phone components reflects ongoing efforts to strike a balance between promoting local manufacturing and ensuring a conducive business environment for industry players.

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