Finance Minister Arun Jaitley on Thursday announced an increase in basic customs duty by up to 10 per cent for all telecommunications products that are outside the urview of the information technology agreement. As a result, the prices of smartphones, tablets, PCs will be going north.
Apart from the enhanced customs duty, he announced an educational cess on imported electronics goods "to provide parity between domestically-produced goods and imported goods".
This will make imported products slightly expensive despite them being under the information technology agreement.
To improve the state of the manufacturing of consumer electronics in India, Jaitleyannounced several relief measures for electronics manufacturers in the country.
So, now there will be no additional duty on components that go into the manufacturing of PCs. Earlier, there was a4 per cent tax.
Even for CRT tubes, LCD and LED displays below 19-inches, there will be zero custom duty.
Many analysts believe this to be a non-starter for the manufacturing industry in the country.
"It's a misplaced policy. It will do very little or nothing for the ecosystem in the country," said Sanchit Gogia, CEO and Chief Analyst, Greyhound Research.
He added that the same strategy was adopted by the previous UPA government, which levied a 6 per cent tax on imported mobile phones costing above Rs 2,000 and yet local vendors like Micromax still source their products from China.
"India does not need to reinvent the wheel. It should rather invest in an open software platform that works on top of the hardware. India should rather leverage the IP and software capabilities that are available in the country."
India also does not have silicon fabs, the basic raw material to manufacture consumer electronics.
It's a well-known fact that local smartphone makers like Micromax and Karbonn source their devices from China. Samsung reassembles its devices in India and considering the flux Nokia's Chennai factory is in over the tax problem with the Government of India, no major smartphone OEM makes its devices in the country.
Essentially, most smartphones will become expensive and the same will remain true for network infrastructure.
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