To promote local manufacturing, the government in the Union Budget 2021 has removed exemptions on parts of chargers and mobiles. The Budget has proposed to withdraw a few exemptions and impose 2.5 per cent duty on several parts of mobiles. "Domestic electronic manufacturing has grown rapidly. We are now exporting items like mobiles and chargers. For greater domestic value addition, we are withdrawing a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobiles will move from 'nil' rate to a moderate 2.5%," said Finance Minister Nirmala Sitharaman.
The custom duty policy must have twin objectives of promoting domestic manufacturing and helping India get on to global value chain and export better, said the minister. "The mobile and electronics sector should have been spared the general removal of exemptions where there were zero percent import duty.
Zero custom duty does not mean zero taxation. These inputs suffer 18 per cent GST also. This increase is also against the consultation held with the industry and the recommendations of the subject Ministry and experts. PMP was not working and exports were weak. That propelled PLI for the sake of competitiveness to address disabilities. This spate of duties takes us right back-queering the pitch for electronics exports. We request the government to maintain the status quo," says Pankaj Mohindroo, Chairman, Indian Cellular Electronics Association (ICEA).
"There is a focus on electronics manufacturing and an increase in duty for certain sub-components is a push to localise some of these components. This might increase in prices for short term or a very modest increase as the bulk of these sub-components have already local suppliers like for Camera modules, PCBAs, chargers, connectors etc.," says Tarun Pathak, Associate Director, Counterpoint Research.
The government aims to make India self-reliant and competitive at the same time. Government of India has been focusing on make in India for the last few years, and in 2020 has the PLI scheme with projected outcome of Rs 10 lakh crore over the next five years. Under international names, five companies manufacturing smartphones for Apple and Samsung were approved.
But as chargers and components have been removed from exemption list, this might lead to smartphone manufacturers doing away with charging adaptors completely. "So, mobile chargers some other components removed from exempt list, to now attract 2.5 per cent. Plus, customs on PCB for charger/adapter now 15 per cent to 10 per cent. Apart from expected price hike, did FM just give a valid reason to the industry to remove in-box adapters?," tweeted Navkender Singh, Research Director, Client Devices & IPDS, IDC India.
Last year, in the name of the environment, Apple decided to remove the charging adaptor from the iPhone 12-series completely. Samsung followed the same and has done away with the adaptor for its flagship Galaxy S21 series. Given the duties chargers would attract, it might be just a matter of time when this becomes an industry-wide standard.