The Union Budget 2018 was presented today where the government showed its commitment towards Digital India by doubling the respective capital allotment. Continuing with the momentum, the budget also pushed the 'Make in India' programme by increasing the custom duty on mobile phones from 15 per cent to 20 per cent.
On July 1, 2017, the central government imposed 10 per cent custom duty on mobile phones but increased it to 15 per cent in December. Now, the 15 per cent has been increased to 20 per cent. This new change will directly impact the prices of the smartphones as smartphone manufacturers and importers will pass on the load to the consumers.
This new move will push major smartphone manufacturers to set up their factories in India, which is the fastest growing smartphone market in the world. If manufacturers want a piece of the pie, they will have to build more plants within the country.
In addition to announcing initiatives to boost domestic manufacturing, the companies that manufacture in India also expected FM Jaitley to lower taxes for Make in India goods. However, most subparts used in manufacturing smartphones still fall under the higher tax brackets as per the latest GST tax slabs. Components like battery shield covers fall in the 28 per cent tax bracket, which are critical in building smartphones.
The NDA government's final budget before the 2019 Lok Sabha election does take a step forward in the direction of Make in India. However, the GST Council will also have to further incentivise manufacturers to set shop in India.
Apple, one of the biggest companies that will be adversely affected by this raise in custom duty, has already set their intent straight with an upcoming facility in Bengaluru that will produce iPhone 6s.
Earlier, the American company only manufactured iPhone SE in Karnataka, under a testing phase. According to a report from Reuters, Apple's production partner Wistron is in the final stages of closing a deal to purchase a piece of land in Bengaluru. The company is expected to spend $157 million to build this new facility.