The Indian government announced a significant reduction in the basic customs duty (BCD) on mobile phones, printed circuit board assembly (PCBA), and mobile chargers, lowering it from 20 percent to 15 percent. This decision was made public on Tuesday as part of the Union Budget 2024-2025, presented by Finance Minister Nirmala Sitharaman.
“In the interest of consumers, I now propose to reduce the BCD on mobile phones, mobile PCBA, and mobile chargers to 15 percent,” Sitharaman declared during her budget speech. This move comes in response to the remarkable growth in domestic production and exports of mobile phones over the past six years, with domestic production tripling and exports increasing nearly 100-fold.
India’s electronics sector has experienced rapid expansion, reaching $155 billion in FY23. Production nearly doubled from $48 billion in FY17 to $101 billion in FY23, driven primarily by mobile phones, which now make up 43 percent of total electronics production.
APPLE
The move is expected to benefit companies like Apple, which imports a portion of its high-end smartphones despite increasing local production.
Neil Shah, co-founder of Hong Kong-based Counterpoint Research, highlighted that around 10-12 percent of Apple iPhones are imported into India annually. The 5 percent reduction in import duty could translate to an annual benefit of $35-50 million for Apple.
Though Apple has ramped up local production through contract manufacturers such as Foxconn and India’s Tata Group, it still imports some of its high-end Pro and Pro Max models.
This reduction will benefit Apple, especially for models that still require imported printed circuit board assemblies (PCBAs). The move is also expected to alleviate import duties for new players entering the market, marking a significant advantage for them. Samsung and other manufacturers, though benefiting to a lesser extent due to their predominant local production, will also gain from the reduced tariffs.
XIAOMI
Muralikrishnan B, President at Xiaomi India, said: “We welcome the Budget 2024 announcement to reduce BCD on mobile phones, PCBA and chargers, while simultaneously extending exemptions on inputs/raw materials for smartphone manufacturing, capital goods, and inputs for capital goods in the electronics industry.”
Xiaomi India, one of the leading phone suppliers in India, has been manufacturing nearly 100 percent of its smartphones locally with an emphasis on sourcing components like PCBA, charging cables, camera modules, and mechanics, among others.
“Today’s announcement will help strengthen the domestic electronics manufacturing ecosystem. The proposal for a comprehensive review of the tariff rate structure is another positive step that will further strengthen the industry,” Muralikrishnan said.
“We appreciate the government’s emphasis on increasing women’s participation in the workforce and the employment-linked incentives for first-time employees. With these progressive steps, we anticipate a surge in consumer spending, including increased demand for smartphones,” Muralikrishnan said.
TRANSSION
Arijeet Talapatra, CEO, Transsion India, said: Transsion India welcomes the Ministry of Finance’s decision to reduce the basic customs duty from 20 percent to 15 percent on mobile phones, mobile PCBA, and chargers.
This policy change will significantly benefit both manufacturers and consumers, fostering a more competitive smartphone market and strengthen our position in the global market. This move will undoubtedly bolster the industry’s growth making smartphones more affordable and we remain committed to the “Make-in-India” initiative to bring the best-in-class smartphones to the ever-evolving Indian market, Arijeet Talapatra said.
ICEA
Pankaj Mohindroo, Chairman of the India Cellular Electronics Association (ICEA), praised the government’s decision. “We are impressed with its intent and direction focusing on enhancing manufacturing and export competitiveness. The Finance Minister has also acknowledged the tremendous growth of mobile phone manufacturing and exports,” Mohindroo told IANS.
The industry had recommended reducing the BCD on mobile phones, their PCBA, and charger/adapters to 15 percent, a recommendation that has now been accepted. “The announcements will go a long way to enhance manufacturing, exports, and our competitiveness. Our proposal for tariff slab rationalization, which has also been acknowledged and will be taken up in the next six months, will further embolden the industry and its competitiveness,” Mohindroo explained.
India has significantly reduced its reliance on smartphone imports, with 99 percent now being manufactured domestically.
Dixon Technologies
Siddhesh Mehta, a research analyst at Samco Securities, noted that this change will reduce costs and support Indian manufacturers. “Dixon Technologies will benefit the most from this move, allowing the company to strengthen its market position and grow further,” said Mehta.
The reduction in BCD is expected to lower the cost of mobile phones and related components, making them more affordable for consumers and boosting the competitiveness of Indian manufacturers in the global market.
BlackZone Mobiles
Kannav Thukral, Managing Director, BlackZone Mobiles, said: “The reduction of Basic Customs Duty (BCD) on mobile phones and chargers to 15 percent is a significant step that will lower production costs, making Indian-made mobile devices more competitive. This move will enable the industry to reach a broader audience, and the reduced taxes will lead to higher profits and increased production.”
Optiemus Electronics
“The significant emphasis on manufacturing is much needed for the growth of the economy. With the expansion of the electronics manufacturing industry, the demand for a skilled workforce has become paramount,” A Gururaj, Managing Director, Optiemus Electronics, said.
The announcement of various skilling initiatives and the scheme to incentivize additional employment in the manufacturing sector, particularly for first-time employees, will provide essential support to industries reliant on skilled workforce, especially in electronics.
The proposal to reduce the Basic Customs Duty on mobile phones, mobile PCBA, and mobile chargers to 15 percent is a positive step. The measures laid out to support the MSME industries in particularly welcome to create a much needed supplier base for electronics within India. These measures collectively send out a strong message on the manufacturing sector and related eco system in India, Gururaj said.
Peeyush Vaish, Partner and TMT Industry leader, Deloitte South Asia, said: “Rationalisation of duties on mobile phones, chargers and enhancements on PCBs is clearly focused on both consumer growth and digitisation and at the same time boost India manufacturing in the telecom infrastructure.”
Shashank Mishra, Partner, Shardul Amarchand Mangaldas, said: “For 2024-25, the Government’s allocation for Production Linked Incentive (PLI) for electronics and IT hardware is 30 percent higher than last year’s, as already announces in the Interim Budget. This area continues to be priority for the Government, especially in light of other announcements on changes in duties for electronics and telecom.”
Peeyush Vaish, Partner and TMT Industry leader, Deloitte South Asia, said rationalization of duties on mobile phones, chargers and enhancements on PCBs is clearly focused on both consumer growth and digitisation and at the same time boost India manufacturing in the telecom infrastructure.
COAI
Cellular Operators Association of India (COAI) has worked with the Government towards raising the level of telecom connectivity in the country and appreciates the Government’s initiatives and steps undertaken in this regard.
“For the Budget 2024-25 though, our long-standing demands remain unaddressed, and we will continue to work with the Government for the same,” S.P. Kochhar, Director General, COAI, said.
The telecom sector maintains that the Universal Service Obligation Fund (USOF) levy be abolished/suspended considering the huge unutilized corpus in the USO Fund to the tune of nearly Rs. 80,000 crores. Till the utilisation of this fund, no USOF levy should be charged from the operators. Further, the License Fee needs to be reduced from 3 percent to 0.5 percent-1 percent, to cover the administrative costs of the Government only, and also clarifying the definition of Gross Revenue (GR) to exclude revenue from activities not requiring a license.
The Government has also proposed to increase Basic Customs Duty from 10 percent to 15 percent on PCBA of certain specified telecom equipment. This will increase cost of providing services as the telcos are continuously upgrading their networks with the advent of the new technology.
COAI has previously requested exemptions on customs duties for certain telecom equipment to alleviate the cost challenges associated with deploying this critical infrastructure. Over the past 5 to 6 years, the Government of India has gradually increased the customs duty on telecom equipment to 20 percent, posing a substantial financial burden and significantly impacting the rollout of 5G services in India. It is recommended that the customs duty be reduced to zero and then gradually increased depending on the creation of an ecosystem for manufacturing of telecom gear in India.
Further, until high-quality equipment is available domestically at competitive prices, COAI urges the government to reduce customs duties for 4G and 5G network products, as well as other related items, to nil.