Budget 2017 will adversely affect mobile prices in India

The Budget 2017-2018 has just been announced and it looks like the prices of mobile handsets could go up marginally as the government has now levied some customs duty on parts that are used in the manufacturing of phones.

The government has in fact proposed to impose a 2% special additional duty (SAD) on imports of populated printed circuit boards (PCB) used for mobile phones. This move comes as part of the government's announcement for Make in India scheme in the Union Budget of 2017-18.

The move has been undertaken in order to 'provide adequate protection to domestic industry', the government said, which will benefit local manufacturers of PCBs.

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On the contrary, this may be seen as an attempt to put pressure on handset manufacturers to make circuit boards in India only or use Indian-made PCBs. The current scenario is that the majority of handset companies only assemble phones in the country.

The India Express also reports that PCBs account for nearly 40-50 percent of the mobile phone's value, and now the increased duty on these components will result in a price rise. "We are expecting a one per cent value impact on the price of the mobile, but obviously this is not going to happen overnight. While one percent might not seem much, if you take into consideration the number of mobile phones being manufactured and sold in India, this duty will translate into a bigger cost for the company," said Bipin Sapra, Partner - Indirect Tax at EY.

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However, there seems to be good news as some handset manufacturers have assured that the increment is minimal and that they could absorb the additional cost in a bid to be competitive in the crowded market. Moreover, brands have said that the duty change is basically directed at bringing design level investments while boosting manufacturing of the parts into India.