February 1, 2017 5:26:54 pm
The price of mobile phones is likely go up next fiscal with the Budget 2017-18 bringing in a Special Additional Duty (SAD) of two per cent on PCBs or Printed Circuit Boards used in the manufacture of mobile phones. Till now SAD was zero, but the new two per cent duty will be imposed on all imported PCBs.
Since PCBs account for nearly 40-50 per cent of the mobile phone’s value, an 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 per cent 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.
“The PCB is the main constituent in mobile phones as well as other electronic devices. This duty is to boost manufacturing of the parts in India, and these are baby steps that are being taken. However, tax incentives alone won’t result in manufacturing in India,” he added.
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Sapra said the government has taken other steps that will eventually boost component manufacturing in India. “They have increased allocation for M-SIPS scheme, and are looking at other incentives as well,” he pointed out.
“Of course, the cost of manufacturing mobiles will go up for companies in India. Now whether they pass this onto consumers or not, will depend on vendor-to-vendor,” said Anshul Gupta, Research Director Gartner.
He also pointed out the government has been trying to provide tax incentives to boost manufacturing in India, and the eventual aim is to have an entire ecosystem of components here. “The government’s idea is to create real manufacturing in India. Currently what is happening here is mere assembly of kits. Eventually, we need a proper manufacturing of parts here, not just PCBs, but also display, battery, semi-conductor and other components,” added Gupta.
But not all are convinced this two per cent duty will result in a hike. “There has been a 2% increase in duties levied on import of PCBA in India, which still will reflect only on one part of the manufacturing cycle with focus on assembly of mobile handsets. On the other hand, providing attractive incentives for localization of design and R&D capabilities would have bolstered the ‘Make in India’ initiative, and driven more handset makers to introduce design led manufacturing in India,” said Kuldeep Malik, Country head for Corporate Sales International, MediaTek India in a statement.
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Indian smartphone manufacturer Intex’s Chairman and Managing Director Narendra Bansal said this will have no impact on the consumer at all. According to him, the increase so small “that brands will absorb this impact and will not pass it on to the consumer.” He also pointed out to the global and Indian trend of a fall in prices of mobile phones.
“Globally and in India, prices of Mobiles are coming down and every month cheaper handsets are making their debut in the market. In such a scenario, in future too, prices of mobiles will keep falling continuously with the result that this increase in duty will get mitigated by the low cost of the handsets,” he said.
The problem right now, even with so-called ‘Made in India’ mobile phones, which includes smartphones, is that almost all of PCBs, and other components are currently being imported into the country. The phones are being mostly assembled, kitted in India, but individual component manufacturing is yet to take off on a big scale.
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