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Govt raises import duty on electronic items to boost Make in India

In a notification issued late on Thursday 14th December 2017 the government raised import duty on electronic items to boost the local manufacturing industry. It will also enhance customs duty collection for the government which it needs at a time when GST receipts have gone down below expectations. By promoting ‘Make in India’ this move will create jobs as well.

GST revenue for October (collected in November) had slipped to Rs83,346 crore from the Rs92,000 crore for a the previous month.

The duty increase, however, will not affect imports from countries with which India has free trade agreements like Thailand and Malaysia.

Analysts said that Apple products will become more expensive. Imported mobile phones, television sets, microwave ovens will cost more because of this duty increase. It is also said that this move will push Apple to hasten its local manufacturing programmes which thus will contribute to Make in India programme.

The duty on push-button phones and mobile handsets has been raised to 15 per cent from 10 per cent and that on TV sets to 20 per cent from 15 per cent .

“This is a major policy shift from the government, as the peak customs duty rate for many electronic products has effectively been increased from 10 per cent to 15 per cent or 20 per cent . This seems to be with the twin objective of increasing revenues as well as to encourage more manufacturing and value addition in India. It is important to note that these measures have been taken under emergency powers under the customs laws. Some announcements can be expected in the upcoming budget about these changes and policy direction in this regard. Manufacturers under other industry segments may also push for similar protection from imports,” said Pratik Jain, indirect tax leader, PwC.

Panasonic India CEO Manish Sharma said more than 90 per cent of TVs sold in the country are locally manufactured and hence will escape the hike in duty. “This will deter unnecessary cheap imports which some brands are doing and increase prices of 65-inch plus screen size TVs, which is a very small market,” he said.

“Some large brands will also try to manage this hike by adjusting in their portfolio.” The hike in duty will increase prices of online exclusive TV brands that are imported as well as premium largescreen curved and ultra HD television sets that cost over Rs 1lakh by 4-5 per cent .

The customs duty on water heaters and hair dressing instruments has been doubled to 20 per cent , while that on TV cameras, digital cameras and video camcorders raised to 15 per cent from 10 per cent . Basic customs duty on imported lamps and light fittings has been raised to 20 per cent from 10 per cent. Imported LED lamps will now face 20 per cent duty from 10 per cent before.

“One thing is clear—it is becoming more and more difficult for Apple,” said Tarun Pathak, associate director at Counterpoint Research.

The research firm said that 2017 will see 280 million phones being sold, 80 per cent of them locally assembled. “With this duty increase, the percentage share of local production will increase to over 90 per cent, by our estimates,” Pathak said.

Local industry welcomed the move as it will push companies to manufacture more mobile phones and other electronic items in the country, aligning with the government’s plan to accelerate Make in India.

“This will be very encouraging for ecosystem development in India, as everyone will be motivated to produce in India,” said Sanjeev Agarwal, manufacturing head of Lava International. “After GST, the benefit of manufacturing in India has got reduced, which will be reinstated now.”

Indian Cellular Association president Pankaj Mohindroo said the reason for the increase was the heavy import of feature phones by Reliance Jio, Itel and other local players. They took advantage of the cost arbitrage that a lower basic customs duty had created earlier in the year between locally assembled phones and imported ones, he said.

“The Indian mobile phone Industry is marching towards global competitiveness,” Mohindroo said. “It does not seek long-term protection. Short-term disability mitigation is however necessary. The recent spurt in imports, especially feature  phones, is responsible for this duty increase, after the phased manufacturing program (PMP) was started from July 2017.” The ICA represents most phone makers including Apple, Samsung and others like Micromax.

“We will see a revival in feature phone manufacturing to earlier levels soon, the pricing will be determined by competition,” Mohindroo said.

 


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