Boost for ‘Make in India’: analysts
New Delhi, Nov 15:
To curb surging imports of electronic items such as mobile phones and TV sets, the Finance Ministry on Friday increased the basic Customs duty on a host of products, which makes them more expensive.
The move will also give a boost to the ‘Make in India’ programme. According to the notification, the Customs duty on mobile phones has been hiked to 15 per cent. The duty on TV sets and microwaves has been doubled to 20 per cent while the duty on video cameras has been hiked to 15 per cent from 10 per cent.
The Customs duty on water heaters and hair dressing instruments has similarly been doubled to 20 per cent along with changes in duty on television cameras, lamp and light fittings and smart electricity meters.
Additionally, the basic Customs duty on LCD, LED and OLED panels for manufacture of TV has been withdrawn; they will attract 7.5 per cent duty.
However, mobile phone prices, with the exception of the Apple iPhone, may not be impacted by the hike.
“India is not looking for long-term protection, but only for difficulty mitigation for a short period. Prices of handsets may not rise as there is more than sufficient domestic capacity,” said Pankaj Mohindroo, President, Indian Cellular Association, adding that domestic manufacturers make nearly 500 million handset pieces annually. White goods companies are assessing the impact on prices.
“It will encourage foreign consumer durables companies to manufacture products in India rather than import them, and go a long way in fulfilling the goal of making the country a global manufacturing hub for a wide range of electronic goods,” said Abhijit Kotnis, Chief Manufacturing Officer, Videocon. “However, it is too early to assess the impact of the customs duty hike on product pricing.”
Welcoming the duty on imported electronics, an official at a domestic electronic manufacturing company said, “It is unclear if the higher duty is also applicable on raw materials. There may be a pass-through of costs if this is the case.”
Curbs on imports
Experts said the move will benefit the government’s campaign to make India a global manufacturing hub by making imports more expensive. “This will make import of these goods costlier, and industry will be forced to explore domestic manufacture of these goods to reduce cost,” said Abhishek Jain, Tax Partner, EY India.
The government had from July 1 imposed a 10 per cent basic Customs duty on smartphone imports along with the rollout of the Goods and Services Tax. Imports of electronics surged 24.97 per cent in November to $4,371.98 million from $3,498.44 a year ago.
Pointing out that the import duty hike has been taken under emergency powers under the Customs laws, Pratik Jain, Leader Indirect Tax, PwC India, said some announcements can be expected in Budget 2018-19 on these changes
“The peak Customs duty rate for many electronic products has been increased from 10 per cent to 15 per cent or 20 per cent. This seems to be with the twin objectives of increasing revenues and encouraging more manufacturing and value addition in India,” he said.
“The increase in basic Customs duty on finished goods like smart meters and LED is welcome. This will go a long way in supporting the Make in India initiative and will have a direct impact of boosting domestic employment,” said Shreegopal Kabra, President, IEEMA.
Manish Sharma, President CEAMA and President and CEO, Panasonic India and South Asia, said, “At CEAMA, we have been pushing the government to increase the basic Customs duty for CBUs imported into the country, which in turn will benefit the overall domestic ACE industry.”
He added: “local manufacturing will grow, giving impetus to the government’s ‘Make in India’ vision. This will not lead to a major price hike as the duty structure for local manufacturing remains unchanged, but it will boost indigenous manufacturing and generate more jobs.”
(This article was published on December 15, 2017)
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