Duty cut on mobile phone components to drop smartphone prices by 3-5%: Experts

Duty cut on mobile phone components to drop smartphone prices by 3-5%: Experts

New Delhi | The government's move to slash the import duty on mobile phone spare parts, like battery cover, lens and SIM socket, is likely to reduce smartphone prices by 3-5 per cent, according to industry experts.

A day ahead of the interim budget, India has slashed the import duty on spare parts, like battery cover, lens and SIM socket, used in mobile phone manufacturing to 10 per cent, from 15 per cent.

"This will benefit the OEMs in reducing the cost, which will, in turn, be passed on to the end customer in the near term. This move can help to drop smartphone prices by 3-5 per cent, empowering the consumers and making the devices affordable, especially in the entry and budget segments. These segments were the worst hit by the currency fluctuations and have witnessed price-rise in the past one year," Counterpoint Research Senior Analyst Prachir Singh said.

The duty cut is aimed at boosting local production and exports, as well as reducing prices in local markets.

The finance ministry, on January 30, notified the cut in duty on all goods for use in manufacturing of cellular mobile phones to 10 per cent.

The other components include battery cover, front, middle and back cover of phone, main lens, screw, SIM socket, or other mechanical items.

Telecom Minister Ashwini Vaishnaw in a post on X said the duty rationalisation would strengthen the mobile phone manufacturing ecosystem through this measure.

"This rationalization of custom duties brings much needed certainty and clarity for the industry and in customs processes. I thank Hon'ble PM (Prime Minister) and FM (Finance Minister) for this step towards strengthening the mobile phone manufacturing ecosystem," Vaishnaw said.

Minister of State for Electronics and IT Rajeev Chandrasekhar said competitiveness and scale are critical to India's transformation into a global hub for electronics manufacturing and exports and pivot into export-led manufacturing.

"Reduction in certain input tariffs and rationalisation will help reduce costs and advance ease of doing business and catalyze export led manufacturing. We believe incentives, and not tariffs, are going to help build a global Electronics industry from India. Every global brand can and must make India its preferred and trusted manufacturing partner and hub," Chandrasekhar said.

Xiaomi India President Muralikrishnan B said that the import duty reduction in mechanics and other small parts is a welcome move and will help bridge the duty gap, which can provide a further fillip to local manufacturing of such components.

"Over time, such moves will help accelerate domestic value addition and facilitate India's growth as an electronic manufacturing destination," Muralikrishnan said.

Industry body Indian Cellular and Electronics Association (ICEA) had urged the government to reduce duty on some components to cut cost of mobile phone production in the country, which will enhance country's competitiveness for exports.

ICEA Chairman Pankaj Mohindroo said this is a critical policy intervention by the government towards making mobile manufacturing competitive in India.

"Electronics have improved from the 9th position a few years ago to India's 5th largest export in 2024. Mobiles constitute over 52 per cent of electronics exports thanks to the Production-Linked Incentive scheme. This is the first industry to leapfrog out of import substitution to export-led growth within the last 8 years," Mohindroo said.

GTRI co-founder Ajay Srivastava had countered the claim of ICEA.

He said the duty cut will have no impact on improving export competitiveness of mobile phones made in India as all inputs, parts, and components used in the making of mobile phones for exports can already be imported at zero duty under various government schemes like SEZ, advance authorisation. Firms like Apple use these schemes.

"The government should watch out if the benefit of duty cuts are passed to domestic mobile phone buyers through price cuts," Srivastava said.

Nangia Andersen India Associate Director- Indirect Tax, Khushbu Trivedi said, the import duty on components like battery covers, main lenses, back covers, and other plastic and metal mechanical items has been decreased to 10 per cent with corresponding inputs/ parts used in manufacturing of a few components brought down to nil duty rate in order to promote local manufacturing.

Additionally, duties on display assembly parts for LCD panels have been reduced to 10 per cent for better alignment.

"The government has in effect slashed the import duty on mobile components with a clear intention of boosting the indigenous assembly of mobile phones. This positive move is poised to facilitate level-playing field to Indian companies by enhancing their competitiveness at the global stage, ultimately contributing to the growth of India's export sector," Trivedi added.

SW India Practice Leader - Indirect Tax Ankur Gupta said in pursuit of becoming the world's fourth-largest cellular mobile phone exporter, India is strategically working towards curbing the import of mobile phone components as finished products.

"The government is redirecting its focus towards importing raw materials to stimulate domestic manufacturing of these crucial components. The implementation of the Production Linked Incentive (PLI) scheme is a pivotal step taken by the government to incentivize manufacturers within the mobile phone industry, encouraging not only the assembly of complete devices but also the production of individual parts," Gupta said.

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