The tech industry expected new tax sops with the announcement of the Union Budget for 2018-19, but the industry ended up getting customs duty hike instead. The government announced hike in duty on mobile phones, and import of mobile phone parts. While presenting the budget in the parliament, Finance Minister Arun Jaitley announced that customs duty on imported mobile phones will be increased from the current 15 percent to 20 percent.
While this move will affect some smartphone manufacturers, the larger effect will be on those already assembling their smartphone models in the country. For smartphone makers importing mobile phone parts into the country, the duty has been hiked to 20 percent from the existing 15 percent. This announcement will affect all smartphone maker assembling their mobile devices in the country under the ‘Make In India’ initiative.
Keshav Bansal, Director, Intex Technologies had suggested that government should reduce GST rates on components used for mobile phones. The budget seems to have neglected the view of the industry.
Late last year, Prime Minister Narendra Modi had said that technology companies should aim to manufacture locally rather than focusing on assembling their products. The new announcement seems to be in the light of that, and the government says the move will boost job growth in these sectors. There was a silver lining in the announcement with the government offering to bring amendments to the customs act in order to make cross-border trade easier.
The budget also raised customs duty on television by up to 15 percent, which could benefit leading names which manufacture their products locally. The hike in mobile phone parts will also affect the service sector with some high-end devices costing more to repair than in the past. We will have to wait for reactions from the industry on whether it will have any negative implications on the product planning.