Budget 2021: Smartphones to get costlier as FM proposes 2.5 pc custom duty on chargers, camera modules

In her Budget 2021 speech, FM Nirmala Sitharaman spoke of boosting domestic manufacturing and imposed custom duties on mobile parts and sub-parts.

Finance Minister Nirmala Sitharaman has proposed a 2.5 percent custom duty on mobile parts and sub-parts. Items that had ‘nil’ custom duty until now would be charged the above custom duty starting April 1, 2021.

These include inputs, parts and sub-parts of printed circuit board assembly (PCBA), mobile chargers or adapters, camera modules, and connectors, and battery packs.

“Domestic electronic manufacturing has grown rapidly. We are now exporting items like mobiles and chargers .For greater value addition, we are withdrawing a few exemptions on parts of chargers and sub-parts of mobiles. Further, some parts of mobile will move from nil rate to a moderate 2.5 percent,” Sitharaman said in her Budget speech.

The proposed custom duty is aimed at boosting local manufacturing of handsets and helping India export better by getting onto a global value chain.

"The thrust now has to be on easy access to raw materials and exports of value addition," she said.

Besides the newly announced ones, several mobile parts already attract custom duties.

For PCBA and moulded plastic for the manufacturing of chargers or adapters, duty will go up from the existing 10 percent to 15 percent, and other inputs and parts of chargers will attract a 10 percent duty. Also, custom duty on specified insulated wires and cables will go up from 7.5 percent to 10 percent in FY21-22.

A jump in custom duties is likely to result in an increase in the MRP of smartphones, especially brands that import parts. Domestic handset manufacturers, on the other hand, will get a boost from this move.

Also, smartphone brands may even be increasingly reluctant to bundle chargers and accessories with phones at the time of sale so as to not bear the additional cost.

It is left to be seen how domestic manufacturers step up in the wake of this move.

Here's a list of other changes in custom duties effective from April 1, 2021.

For YourStory's multimedia coverage of Budget 2021, visit YourStory's Budget 2021 page or budget.yourstory.com

Edited by Saheli Sen Gupta