Mobile handset manufacturers are demanding lower taxes on inputs for critical components. The higher taxes on components has led to higher production costs. The new taxes were put in place at Budget 2021-2022. Also Read - Actor Jacqueline Fernandez falls victim to mobile number spoofing: How to ensure you are not next?
In a letter sent to Union Minister of State for IT, Rajiv Chandrasekhar, accessed by The Economic Times, Pankaj Mohindroo, chairman of the India Cellular & Electronics Association (ICEA) highlighted the pain points of the industry and possible rectifications. Also Read - Lava sees silver lining in sub-10K smartphone segment
The association believes that increased import duties for chargers, power banks, camera modules, and printed circuit boards should be rolled back into the upcoming budget in February 2022. Also Read - India ranks 109th globally in mobile download speeds: Ookla
Mohindroo stated that the increased tariffs on the components make it cheaper to import whole products, instead of manufacturing them in the country. He further claimed that scaling back of production due to competitive disadvantage has further led to loss between Rs 10,000 crore to Rs 15,000 crore.
Conflict with PLI scheme
He explained that the Production Linked Incentive scheme introduced by the government is in direct conflict with the increment in tariff.
Highlighting the specific case study of the production of chargers. According to ICEA, charger production was amplified up to 600 million units with the help of over 60 manufacturing units. The introduction of the new tariffs have now caused de-growth in the charger industry.
The industry body is also looking for the replacement of 20% basic customs duty that is currently being charged on all smartphones priced above Rs 20,000.
According to ICEA, “The grey market in high-end phones is greater than 50%. Price arbitrage is 43.96% in high-end phones (out of which 22% is the BCD and 18% is the GST).”