Budget 2021: Industry urges government to withdraw duty hike on mobile parts

Just a day after the announcement of Union Budget 2021, the electronics industry has opposed the proposed increase in the customs duties on some mobile parts.

To promote local manufacturing, the government in the Union Budget 2021 has removed exemptions on parts of chargers and mobiles. The Budget has proposed to withdraw a few exemptions and impose a 2.5 per cent duty on several parts of mobiles.

Finance Minister Nirmala Sitharaman said, “Domestic electronic manufacturing has grown rapidly. We are now exporting items like mobiles and chargers. For greater domestic value addition, we are withdrawing a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobiles will move from ‘nil’ rate to a moderate 2.5%.”

This year the government had the onerous task of igniting growth in the economy and get India back to 8-9% growth levels.

Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA) said, the move is against recommendations made by the industry and experts.

He said, “The mobile and electronics sector should have been spared the general removal of exemptions where there was zero percent import duty.”

He further added, “Zero customs duty does not mean zero taxation. These inputs suffer 18% GST also. This increase is also against the consultation held with the industry and the recommendations of the subject ministry and experts. The Phased Manufacturing Programme (PMP) was not working and exports were weak. That propelled the Production Linked Incentive (PLI) scheme for the sake of competitiveness to address disabilities. This spate of duties takes us right back, queering the pitch for electronics exports. We request the government to maintain the status quo.”

Analysts said the government’s move is likely meant to urge industry players to ramp up manufacturing in India. The government had introduced its PLI scheme last year, approving five Indian and five global manufacturers for the same. The scheme provides 4-6% cash incentives for making mobile phones in India.

FM Nirmala Sitharaman, on Monday, said customs duties on “some mobile phone parts” will increase from nil to 2.5%. Duties on the printed circuit board assembly (PCBA), camera modules, and connectors have been increased from zero to 2.5%.

PCBA and molded plastic for manufacturing chargers and adapters will incur duties of 15%, up from 10% earlier. Input parts for mobile chargers (other than PCBA) will also incur duties of 10% now (from zero earlier), while parts for Li-Ion cells will incur duties of 2.5%.