A store attendant talks to an Indian Army soldier at an electronic retail store in the town of Zirakpur on the outskirts of Chandigarh, Punjab. (Photographer: Udit Kulshrestha/Bloomberg)

Government Raises Customs Duty On Mobile Phones, Other Electronic Items

The government today hiked the customs duty on a range of electronic items, including certain mobile handsets and microwave ovens, in a move to push its ‘Make in India’ initiative.

Basic customs duty, which is levied on imports to India, has been raised to 15 percent from 10 percent on mobile phones and electric meters, according a notification by the Department of Revenue under the Finance Ministry. Customs duty on microwave ovens, lamps and light fittings has been hiked to 20 percent from 10 percent at present.

These changes come into effect from Dec. 14, 2017.

With the implementation of Goods and Services Tax, integrated GST is levied on the price of imported goods plus applicable basic customs duty.

Liquid crystal display, light emitting diode and organic light emitting diode used as inputs for manufacturing television sets, which were earlier exempted, are now subject to 7.5 percent basic customs duty, Sumit Lunker, indirect tax partner at PwC India, told BloombergQuint.

This increase in customs duty hike is in line with government’s Make in India initiative, Abhishek Jain, indirect tax partner at EY India said.

This will also shore up the revenues for the government, especially when GST collections look a bit uncertain.
Abhishek Jain, Indirect Tax Partner, EY India

This hike in duty comes amid rising trade deficit, and uncertain revenue from the Goods and Services Tax. India’s trade deficit for July-September was $32.8 billion (over Rs 2.1 lakh crore), and revenue from GST for October were at Rs 83,346 crore, lowest as compared to revenues for July to September.

NR Bhanumurthy, professor at National Institute of Public Finance and Policy, said that the duty hike might help government in slightly increasing their revenues, but it appears largely different from the Centre’s revenue mobilisation plan. This step is largely aimed at expanding the Make in India plan, Bhanumurthy said.

Abhijit Kotnis, chief manufacturing officer of consumer electronics maker Videocon Ltd. agrees. The move will “boost the domestic manufacturing industry and give a fillip to the government’s Make in India’ initiative”, he said in an emailed statement.

It will also encourage foreign consumer durables companies to manufacture products in India rather than import them, and go a long way in fulfilling the goal of making the country a global manufacturing hub for a wide range of electronic goods.
Abhijit Kotnis, Chief Manufacturing Officer, Videocon

However, Kotnis added that it is too early to assess the impact of the customs duty hike on the pricing of products.