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Budget 2020: ACs, refrigerators, some fans set to become expensive

The customs duty has been hiked from 10 percent to 12.5 percent for compressors in ACs and refrigerators with immediate effect.

February 01, 2020 / 10:59 PM IST

Refrigerators, air conditioners (ACs) as well as imported fans will become expensive from February 2020 onwards. The basic customs duty has been increased for compressors used in ACs and refrigerators in Union Budget 2020. Duty on imported fans has also been hiked.

These changes are applicable with immediate effect. Hence, the new customs duty will be valid from February 1 itself.

The customs duty has been hiked from 10 percent to 12.5 percent for compressors in ACs and refrigerators.

"There would be a price increase in refrigerators and air-conditioners because compressor manufacturing capacity in India is limited," said Kamal Nandi, Business Head and EVP – Godrej Appliances & President – CEAMA (Consumer Electronics and Appliances Manufacturers Association).

As far as refrigerators are concerned, only LG and Godrej manufacture compressors in India. The rest of the industry imports this component from abroad. Similarly, AC compressors are majorly imported from places like China.

For ACs, this is a double whammy. AC prices are already high due to a 28 percent goods and services tax on the product.

Further, the customs duty on refrigerating equipment like freezers has also been hiked to 15 percent. However, this is only for commercial refrigerators.

The thrust by the government is to promote 'Make in India'. Hence the customs duty on a host of home appliances.

For fans, the customs duty has been hiked to 20 percent from 10 percent for all categories including table fans, ceiling fans and pedestal fans. However, this is not expected to have a big impact since a majority of fans are manufactured in India.

On one hand while the finance ministry’s endeavour is to boost local manufacturing of electrical appliances, the fact is that only 30-35 percent is fully manufactured in India. The rest of the products have one or more key components being imported.

For televisions, the nil open-cell panel customs duty is applicable till September 2020. Finance minister Nirmala Sitharaman said that the government will review the rates after September.  If the customs duty is hiked post that, televisions will become expensive since the open cell is what makes the television panel.

M Saraswathy
M Saraswathy
first published: Feb 1, 2020 04:15 pm