Budget 2018: Apple phones may get costlier as govt hikes customs duty on imported mobiles

(Image: Reuters)

If you have been planning to buy a mobile phone but haven’t yet, it may be time to do it soon as it is set to cost more. Finance Minister Arun Jaitley on February 1 raised the customs duty on imported mobile phones to 20 percent from 15 percent earlier.

A few brands, particularly in the premium space, are most likely to be affected by this decision, say experts.

According to experts, brands like Apple and Google will be hit as they are heavily dependent on imports. This move will force them to shift manufacturing to India.

India is now the second largest market for phones in India, behind China, and most of the smartphones sold here are imported.

Jaitley’s decision to raise customs duty on imported mobiles is because of two factors. One reason is in line with Prime Minister Narendra Modi’s flagship programme to promote local manufacturing under the government’s ‘Make in India’ scheme and to create jobs.

The second reason is that imports of electronic items and particularly those of mobiles have surged in the last few years, such imports are now only behind import of crude oil. The Indian mobile phone market is dominated by Chinese and Taiwanese vendors like Lenovo, OnePlus, Xiaomi, Huawei, and Oppo.

The companies mostly assemble the phones here after importing the printed circuit boards, camera modules and displays or just wholly import the item. The structure of taxes resulted in the finished goods incurring lower duty than the components, putting the local manufacturers at a disadvantage which pay goods and services tax of 12 percent.

On the other hand, this is good news for local Electronics Manufacturing Services or EMS players as the increase in duty will further increase the local assembling share as brands will ramp up their current output from local EMS [Electronics Manufacturing Services] facilities since capacity is already there.