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Indian Budget 2016 – Imported Handsets and Tablets price may rise by 5~10 %

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Highlights of Budget 2016 on Gadgets – Key concentration on ” Make in India “

  • 2% increase in special additional duty (SAD) on printed populated circuit boards
  • withdraw Basic Customs Duty (BCD) and Countervailing Duty (CVD) exemptions on imports of chargers, adapters, battery, wired headsets and speakers used in mobile phones.
  • 10% BCD on preform of silica for manufacturing of optical fibre
  • BCD exemption on capital goods and inputs used for making micro fuses, sub-miniature fuses, resettable fuses has also been proposed
  • imposed BCD of 10% on soft switches and voice over Internet Protocol (VoIP) equipment namely VoIP phones, media gateways, gateway controllers and session border controllers, optical transport equipment, IP radios, carrier ethernet switch and Long Term Evolution (LTE) products among others
  • By 2018, We may witness all major Suppliers of Smartphones shifting Manufacturing base in India. That will create more Employment Opportunities, More R & D Centers in India, Retention of Talent in India.
  • Key suppliers like Xiaomi, iPhone, Gionee, Samsung, Intex and Lava may see boost in Business.
  • Some players like LG, Panasonic, Meizu, One Plus may see decline in Sales if Price Increase is proposed.
  • 4G Smartphones will get costlier by another 5 % due to imposed BCD of 10 %
  • By 2018 India will be ready with the Eco-System required for Developing Smartphones

What’s the Logical Impact :

With a BCD of 10%, CVD of 12.5% and SAD of 4%, the total duty cost comes to 29.44%, making the duty differential of 27% as the products made locally attracted excise duty of only 2%.

What Indian Cellular Association thinks about it : Pankaj Mohindroo, president of the Indian Cellular Association, which represents handset maker in India stated

“Populated PCBs are roughly half the cost of a phone… any increase in cost will get passed onto consumers. This is a downright negative move.”

As Per Telecom Industry Experts : by imposing 2% SAD duty differential between complete mobile phones and its parts or components for manufacturing will be significantly diminished. Major issue is that India has not yet developed the eco-system for the complexity involved in populating a mobile phone bare PCB.

 

What could be overall Impact on Handset Industry : Cost of the components put together is about 35% for featurephones, compared to 10% in smartphones. Therefore, prices of featurephones may rise more than that of smartphones in the immediate future.

Already Feature Phones are dying in India, This means in 2016 We may see growth of Smartphones by another 50 %. Already feature Phone Market is shrinking, By 2017 , We may witness death of Feature Phones in India.

The government has annulled duties on inputs, parts and components, sub-parts for manufacturing of chargers, adapters, battery, wired headsets and speakers of mobile phones.

Industry Review 

Keshav Bansal, Intex : 

“With a great emphasis on the nine pillars of economy in the FY16-17 Union Budget, the Finance Minister has made a commendable effort towards creating a robust path for the future. We are happy that the budget has walked the talk for Make in India by proposing changes in the customs & excise duty structure in components and sub-components to give fillip to the creation of domestic mobile component ecosystem. The skill development push is another positive as the market demanded and industries have been desperately searching for.”

Pradeep Jain, Karbonn Mobiles :

“With Karbonn’s focus on indigenous manufacturing employing local manpower and skilling them, we are very happy to be an active contributor to the government’s Skill India initiative. However, the withdrawal of BCD, CVD and SAD exemption on mobile phone chargers, adapter, battery, wired headsets and speakers for actual manufacturing is disheartening and is likely to stifle the growth of Indian Smartphone players and impact their price competitiveness. The parts and components ecosystem in the country is still in its nascent stage. While the incentives on local manufacturing announced in the previous budget were welcoming, government should have allowed for a gestation period for local handset players to strengthen their manufacturing capabilities before withdrawing tax exemptions on completely built units.’’

Arvind Vohra, Gionee Mobiles :

“The Make in India initiative by the Government has been in the highlight for a long time.  The budget 2016 clearly depicts that the government is in full support of start ups and Make In India initiatives. The Finance Minister has proposed changes  in the  customs & excise duty rates to boost Make In India, however it is yet to be seen how it would affect the smartphone industry. In my opinion this will surely act as an impetus for the sector and will go on to make the industry more competitive. Government’s initiative towards the R&D sector to Accelerate Depreciation Limit to 150% from FY 2018 is also a welcome boost for the manufacturing sector. Overall I feel it is a futuristic budget with the intention of showing the light at the end of the tunnel for boosting entrepreneurship in India.”

Rajesh Agarwal, Micromax :

“The growth focused Union Budget 2016-2017 is announced in the light of stressed global slowdown, yet it is heartening to see how the growth has accelerated to 7.6% and the CPI inflation has come down to 5.4%. Union Finance Minister had a herculean task cut out to meet the raising expectation from industry leaders and the aam aadmi as he presents his third general budget. The Budget 2016 outlines the government’s commitment to reinvigorate the economy, kick-start investment cycle and also maintain fiscal prudence, but it remains to be seen on how quickly would we see the impact in execution,” he adds.

Sudhin Mathur, Lenovo India :

“The Union Budget for FY 2016-17 is a big step in terms of aiding the common man, small entrepreneurs and companies looking to invest in India. Ease of doing business and financial sector reforms being two of the Nine pillars that the Government will look towards to transform India, is a welcome move,”

 

 

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