Clouds of blues enwrap mobile industry over increase in excise duty on mobile devices, as against their expectations the budget feels more like a formality done without much thought given to boost the overall industry. Also Read - Aircel-Maxis deal: AG says there is enough material to charge sheet former Telecom Minister Dayanidhi Maran
The budget released for this fiscal year will require consumers to shell out more for mobile phones priced in over Rs 2,000 as Finance Minister P. Chidambaram has raised the excise duty on the mobile phones by 5 percent from the 1 percent last year.
Moreover, as the excise duty is levied on the locally manufactured devices, company like Nokia and Samsung with their manufacturing units in India will be the most affected as they will now have to end up paying more tax on their products, leading to hike in their product prices for end consumers.
This means that phones will now cost around five percent more than their prices earlier, like a phone costing Rs 10,000 will now cost around Rs 10,500, if companies decide to pass on the hike to consumers.
“The increase in the excise duty on mobile phones will not have a positive impact on the mobile industry and should lead to an increase in prices for end consumers, said Asim Warsi, vice president, Samsung Mobile.
Soon Kwon, managing director, LG India agrees to the same and hinted at the possible increase in the prices of their phone. A 5 percent increase in excise duty is certainly going to hurt mobile growth. We are right now studying the impact of increase in excise duty on mobile phones, there is a possibility that we might need to pass this increase to consumers.
While this increase in tax levied on the vendors with manufacturing units in India equating to inflation in the prices of manufacturing mobile phones, it might also alter the minds of those players that have been planning to set up their manufacturing units here in India.
While big brands like Samsung, LG and Nokia have their own concerns over the issue, even the local vendors like Lava and Micromax, which are considered to import devices from the Chinese vendors, are not favoring this decision. As reacting to the issue, SN Rai, co-founder and director, LAVA International stated that, The industry is already suffering from Non Uniform VAT and the increase in the duty will further escalate the prices. Also, this step is a discouraging move to the domestic industry which is looking at making India manufacturing base for mobile phones.”
Deepak Mehrotra, CEO, Micromax agreed to it and did not really find the budget ideal for the telecom industry. He retaliated strongly on the increase in excise duty by saying that, With the change in the duty structure, none of the players in the industry can absorb this steep increase in prices, which will have an impact on the rate of adoption of the smartphones and smart feature phones.