Excise duty structure for mobiles handsets, including cellular phones, is being changed to 1 per cent without CENVAT credit or 12.5 per cent with CENVAT credit, Finance Minister Arun Jaitley said while presenting the Budget in Parliament.
Earlier the duty structure for mobiles was 6 per cent with CENVAT credit. For tablet computers, the duty structure is "2 per cent without CENVAT credit or 12.5 per cent with CENVAT credit."
"Manufacturer or producer of final product is allowed to take CENVAT credit. This would encourage local manufacturing rather then import," IESA Chairman Ashok Chandak told PTI.
Local manufacturer can claim duty benefits on VAT paid on purchase of various input materials. The increase in CENVAT credit will give benefit to domestic manufacturers against those importing such items.
The minister also announced to exempt "parts, components and accessories, falling under any Chapter, for use in the manufacture of tablet computers and their subparts for use in manufacture of parts, components and accessories, " from "BCD (basic custom duty), CVD and SAD.
"All goods except populated PCBs, falling under any Chapter of the Customs Tariff, for use in manufacture of ITA bound goods from 4 per cent to Nil," Jaitley said.
Indian Cellular Association National President Pankaj Mohindroo said that government's announcement on CENVAT leads to increase countervailing duty on imports to 12.5 per cent on imposed on imported mobile and tablets which is going to make strong case for manufacturing within country.
"Increase in CVD will increase price of imported products but domestic manufacturers like Samsung and Micromax stand to gain from this," Mohindroo said.
Government has also removed special additional duty on components of tablet which ICA National President said is a great advantage for domestic manufacturers.
ELCINA Electronics Industries Association of India said that not exempting printed circuit board from SAD will encourage local sourcing of components and is a positive step for domestic manufacturing.
"Continuing SAD on populated PCB will encourage people to gets them made in India. This will boost domestic electronic manufacturing services," ELCINA Secretary General Rajoo Goel said.
In addition to this blanket announcement to reduce corporate tax from 30 per cent to 25 per cent also rejoiced industry players.
"Reduction of corporate tax to 25 per cent will make up more competitive with other Asian economies where bulk of manufacturing investment was going," Mohindroo said.