Union Budget: Customs duty reduced on mobile parts, hiked on telecom equipment
The BCD on oxygen-free copper used to manufacture resistors has been reduced from 5% to nil to increase value addition in the domestic electronics industry
Union finance minister Nirmala Sitharaman on Tuesday announced the reduction in basic customs duty (BCD) on mobile phones, mobile printed circuit board assembly (PCBA), and mobile chargers from 20% to 15% fulfilling a longstanding industry demand. The BCD on PCBA of specified telecom equipment was increased from 10% to 15% to incentivise domestic manufacturing of telecom equipment.
Twenty-five critical minerals and rare earth elements have been exempted 25 from the customs duties. The BCD on two of them has been reduced to secure their availability for strategic sectors such as telecommunications, high-tech electronics, energy, space, defence, renewable, and nuclear energy.
“With a three-fold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured. In the interest of consumers, I propose to reduce the BCD on mobile phones, mobile PCBA, and mobile chargers to 15 per cent,” Sitharaman said in her Budget speech.
The BCD on oxygen-free copper used to manufacture resistors has been reduced from 5% to nil to increase value addition in the domestic electronics industry. The BCD on specified goods used in manufacturing connectors has been reduced from 5 or 7.5% to zero.
The India Cellular and Electronics Association (ICEA), a body of electronics companies, this month sought the reduction in input tariffs to reduce the cost of production, increase the production of electronics in India, and increase their export, especially given the lower tariffs and fewer slabs in countries such as China and Vietnam. It said all tariff lines that raise costs significantly be reduced to zero. ICEA said duty on PCBA, charger, and adapter be reduced to 15% from 20%. It said the 2.5% tariff on sub-assembly parts and inputs (like PCBA parts, connectors, camera modules, etc) be removed entirely.
By 2025, ICEA wants the seven tariff slabs for the mobile sector to be reduced to four – 0%, 5%, 10% and 15%.
The ICEA welcomed Budget announcements. “Our proposal for tariff slab rationalisation has also been acknowledged and Hon’ble FM [finance minister] has announced that it will be taken up in the next six months, which will further embolden the industry and its competitiveness,” ICEA chairperson Pankaj Mohindroo said. He added the expansion of concessions in BCD to mechanics and die cut, to include rubber, glass, and aluminium, is an “excellent clarification”.
“We welcome the tariff concessions on a majority of critical materials used in strengthening the semiconductor ecosystem. The concessions are provided to the extent of nil from existing BCD slabs of 10% to 2.5% depending on the different critical metals. We also welcome the rationalisation of tariff on silicon quartz, and silicon dioxide from 5/7.5% to 2.5%. This is a crucial step to propel setting up a strong silicon and power semiconductor wafer production ecosystem in the country,” Mohindroo said.
Telecom Equipment Manufacturers Association chairperson NK Goyal said Budget announcements will discourage imports of PCBA that is ready-made assembly and encourage local manufacturers to do in-house assembly of the PCB. “PCB is the most important part of all telecom equipment. Hence, it will promote local manufacturing of the same,” said Goyal. “In the case of mobile phones, India is the second largest manufacturer in the world and we aim to become the first in the world. A reduction in duties from 20 to 15% will increase manufacturing of mobile phones in India.”
On January 30, the finance ministry reduced customs duty on items including SIM sockets, screws, battery cover, front covers, middle covers, main lenses, back cover, GSM antennas, sealing gaskets, and other mechanical items of plastic and metal used in manufacturing mobile phones from 15% to 10%. The customs duty was slashed to zero for parts such as resin, mesh, adhesive, and sponge.
