India imported nearly $42 billion of telecom instruments, computer hardware and peripherals, electronic components and instruments and consumer electronics goods in FY17.
The budget is expected to give Make in India a boost through a customs duty rejig, but the move could make imported high-end mobile phones and electronic goods costlier. Basic customs duty may be imposed on components such as printed circuit boards, camera modules and displays that are allowed duty free entry now.
The exercise is part of a broader customs duty revamp in the budget that is expected to also address inverted duty structures—finished goods facing lower duty than the inputs that go into them. With the rollout of the goods and services tax (GST) only customs duty remains within the ambit of the central government budget.
The government is keen to make the country a manufacturing site for electronics instead of an assembly hub.
On July 1, the government imposed basic customs duty on mobile phones at the rate of 10% and subsequently raised it to 15% on December 14. Tax experts question the effectiveness of such a move with free trade agreements offering customs duty exemption.
“With BCD exemptions available under FTA as well, their impact will also require a separate evaluation on Make in India initiative,” said Rahul Shukla, executive director, indirect tax, PwC.
ADVERTISEMENT
ET View: Desist from Tariff Hikes Higher tariffs are entirely avoidable. It can lead to spurious value addition behind high tariff walls.
We do need a policy to boost manufacturing and made-in-India goods, products and items, but these need to be globally competitive. The way forward is to have reasonable, modest tariff protection so as to have an ecosystem for innovation, along with provision for import competition. In tandem, a package of policy measures to step up technical and financial capacity of producers in the telecom and allied space seems warranted going forward.
