Import duty cut to make Indian mobile production ecosystem more competitive: ICEA

The government's proposal to reduce import duty on several components as well as exemption of capital goods will reduce cost of indigenous mobile manufacturing, but consumers are unlikely to get a major relief, according to an industry body.

India Cellular and Electronics Association Chairman Pankaj Mohindroo said that the removal of 2.5% duty on mobile parts was a "nuisance" tariff which was not doing any value addition in the mobile phone manufacturing ecosystem.

"The government has removed the 2.5% import duty across the board. In terms of cost, it is not very significant. It will help the industry save 0.09-0.1%. Overall measures announced in the budget will boost competitiveness in the Indian mobile manufacturing space which is good for attracting investments and enhancing exports," Mohindroo said.

At present, all major brands including Apple, Samsung, Google Vivo, Xiaomi manufacture their smartphones in India.

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Finance Minister Nirmala Sitharaman in the union budget 2025-26, announced to make basic customs duty nil from 2.5% at present on inputs, parts or sub parts for manufacturing of motherboards, camera modules, connectors, wired headsets, microphones and receivers, USB cables, finger print readers, and scanners of cellular mobile phones.

"The tariff protection was required in the infancy of manufacturing but now the tariffs are no longer valid in the mobile phones' case. The industry has reached a gigantic scale of $60 billion in annual production. The removal of 2.5% BCD will enable manufacturing, remove ambiguity and increase the competitiveness of manufacturing," Mohindroo said.

The government proposal to remove import duty on copper, rubber, and other metals is expected to enhance local value addition.

Mohindroo said that removal of BCD on open cells of LCD, LED television panels will boost domestic manufacturing of open cells because there will be a reasonable differential duty between the finished open cell on the other hand and its parts, thus facilitating manufacturing of the open cell which is a critical input of flat panel display.

He said that exemption of capital goods from BCD for manufacture of lithium ion batteries of mobile phones (28 lines) and EV (35 lines) will be an enabler for indigenous production on lithium-ion cells and build competitiveness in the local industry.

Mohindroo said that the enhanced limit for income tax exemption will give more money in the hands of consumers which is expected to boost sales of mobile devices.

"Most of the young workforce fall within the Rs 12 lakh annual income bracket. They are one of the big consumer bases of mobile phones. We expect significant growth in the mobile phone industry with this enhanced income tax exemption," he said.