Government increases customs duty on mobile phones to 15 percent

Apple will be facing the music again as the government has now increased customs duty on various items including mobile phones. A notification has been issued by the finance ministry and it looks like this move will hurt the Cupertino-based giant the most amongst other manufacturers.

The notification issued by the Department of Revenue under the Finance Ministry that came late on Thursday said customs duty will go up from 10 percent to 15 percent for mobile handsets.

Pankaj Mohindroo, Founder and National President of the Indian Cellular Association, told IANS: "Indian mobile phone industry is marching towards global competitiveness. It does not seek long-term protection. Short-term disability mitigation is however necessary. The recent spurt in imports especially feature phones (after PMP 1/7/2017 notifications) is responsible for this duty increase."

"We will see a revival in feature phone manufacturing to pre-July 2017 levels soon. Calls to increase duty to 40 percent bound rates are however unwarranted. I am sure that Government of India will do a careful impact analysis after this hike and take a suitable call around budget time," he added.

According to industry experts, smartphone players which are import-dependent like Apple and Lenovo will bear the maximum brunt of this decision.

"Apple will be hit the most as the company imports nearly 88 percent of its devices into the country. It will either have to increase the price or start assembling more in the country," Tarun Pathak, Associate Director, Mobile Devices and Ecosystems, Counterpoint Research, told IANS.
Currently, Apple is assembling iPhone SE model at its Bengaluru facility with Wistron Corporation, its Taiwanese manufacturing partner.

Meanwhile, "Domestic and some China-based manufacturers will not be affected as most of them are assembly a lot in the country, including South Korean giant Samsung. They just need to speed up their assembly lines," Pathak added.

Apple is also seeking tax relief and other incentives from the government to begin assembling more handsets in the country. But again this is a big blow to the company.

"Assembling in India becomes critical since this will give savings to Apple which can partly be used to bring down prices and part of it can be used for expanding distribution, channel margins, retail marketing spends and ensure placement in smaller towns and cities where the consumer is highly aspirational and strives for a premium brand like

Apple," Navkendar Singh, Senior Research Manager at IDC India, had told IANS earlier.
Additionally, the notification has also mentioned that customs duty on television and microwave ovens have been increased from 10 percent to 20 percent. Even customs duty on video recording equipment and television cameras have gone up from 10 percent to 15 percent.

Source: IANS