Finance Minister Arun Jaitley presented the Union Budget 2017-18 introducing some changes in customs duties to provide adequate protection to domestic industry.” Post Budget announcement, it is highly anticipated that prices of mobile phones will shoot up considerably. This sudden hike is suggested as a result of introduction of Special Additional Duty (SAD) of two per cent on PCBs or Printed Circuit Boards used in the manufacture of mobile phones.
Until date, SAD was zero, but now a two per cent duty will be imposed on all imported PCBs.
SAD is a duty levied on imports to ensure that interest of local sellers does not get violated. Because it is believed that imports are considerably cheaper than the domestic product, and hence attract more customers, the local manufacturers suffer. Thus to ensure both the imports and local prices are equal special additional duty is levied.
Since PCBs account for nearly 40-50 per cent of the mobile phone’s value, an increased duty on these components has high probability of resulting 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.
“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.
Rajesh Agarwal, Co-Founder, Micromax Informatics said, “This budget was intended to bring in a lot of optimism and I think the government has clearly defined its intention to revive the rural economy with spending on key areas demarcated, including the skill based education, healthcare, housing and infrastructure development which will definitely generate income in the rural areas.”