Centre cuts duty on components used to make mobile phones

India’s finance ministry has reduced customs duty on certain goods used in mobile phone manufacturing from 15% to 10%, a move expected to lower device prices slightly. The reduction applies to components such as SIM sockets, screws, battery covers, and GSM antennas. Customs duty on other parts including resin, mesh, adhesive, and sponge has been cut to zero. The move aims to boost the country’s mobile hardware industry and eliminate duty inversions caused by recent free trade agreements. The exact implementation date for the lower duty has not been specified.

The finance ministry has reduced customs duty for certain goods used in manufacturing mobile phones from 15% to 10%, a decision that officials said would help India’s mobile hardware industry and one that experts believe could lead to marginally cheaper devices.

The reduction of the import duty applies to parts such as SIM socket, screw, battery cover, front cover, middle cover, main lens, back cover, GSM antenna, sealing gaskets, and other mechanical items of plastic and metal.

For certain other parts like resin, mesh, adhesive, sponge, etc, the customs duty has been slashed to zero.

“This rationalisation of custom duties brings much needed certainty and clarity for the industry and in customs processes. I thank Hon’ble Prime Minister and Finance Minister for this step towards strengthening the mobile phone manufacturing system,” IT minister Ashwini Vaishnaw said.

The gazette notification, however, did not specify any date for implementing the lower duty.

On January 27  the government was considering proposals to rationalise customs duties on almost 50 products in an attempt at boosting local manufacturing by removing duty inversions caused by some recent free trade agreements. These steps, officials familiar with the matter said at the time, could also cool commodity prices and check dumping of Chinese goods.

Pankaj Sharma, the president and CEO of Dixon Technologies, which manufactures mobile phones for Xiaomi, Samsung, Nokia and Motorola amongst others, called the move “good for the industry”. “It makes manufacturing much cheaper. The earlier scheme left scope for classification issues where components could be mis-classified. That has been resolved now since it is all at 10%,” Sharma said.

“The industry generally always tries to pass the benefit to end customers to capture more of the market,” Sharma said. This reduction in customs could result in a maximum 1-2% reduction in the market price of mobile phones, he added. “The customs duty has been reduced for only specific components. The overall impact on final price will thus be limited,” he said.

Indian mobile manufacturing firm Lava’s president, Rishi Bhatnagar, also called this “a good step”. “We are very happy with this. This will help us improve our margins. I was surprised that this was announced on the eve of the [interim] Budget since this has been one of our key asks form this Budget. I was expecting this announcement in the Budget speech tomorrow… This reduction in customs duty is a crucial step for us as we are not only manufacturing mobile phones but also designing them,” he said.

In a statement, India Cellular and Electronics Association (ICEA) too hailed the move. “The amendment is an important policy change toward export-led growth, ensuring policy consistency, and addressing competitiveness in manufacturing, which is a crucial victory for the mobile phone manufacturing industry in India. This was amongst the key asks that have been made by ICEA for the interim budget 2024-25,” the industry body said.

“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 for 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 B, president of Xiaomi India, said.