India-made handsets to be cheaper, entry-level handsets may be dearer

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    India-made handsets to be cheaper, entry-level handsets may be dearer

    With this, companies like Nokia and Samsung, will have option of paying a lower excise duty of just 1%

    To boost domestic manufacturing of mobile handsets, Finance Minister P Chidambaram announced restructuring of excise duty at 6% for all categories.

    “To encourage domestic production of mobile handsets (which has declined) and reduce the dependence on imports (which have increased), I propose to restructure the excise duties for all categories of mobile handsets. The rates will be six percent with CENVAT credit or one% without CENVAT credit,” Chidambaram said while presenting the interim Budget for 2014-15.

    With this, companies like Nokia and Samsung, who manufacture handsets in India will have to option of paying a lower excise duty at just 1% (without taking CENVAT credit), while importers will have to pay the 6% duty besides the import levy.

    “This will certainly help domestic manufacturers. Companies manufacturing in India will also have the option to pass on the benefit to end consumers, which will reduce prices of India-made mobile handsets,” said Bipin Sapra, tax partner, EY.

    However, the move will have a negative impact on the entry-level handsets costing up to Rs 2,000 as there was zero excise duty in the category. The mobile handset market in India is estimated at 220 million units per annum, of which close to 25% are priced up to Rs 2,000.

    “Duty on entry-level handsets will force companies to increase prices by a few percentage points,” said SN Rai, co-founder, Lava Mobiles. Chidambaram had, in Budget 2013-14, increased excise duty by five percentage point increase from 1% to 6% on mobile handsets priced more than Rs 2,000.

    Pankaj Mohindroo, president of Indian Cellular Association, said the announcement does not benefit the handset manufacturers.

    “The six% excise was there since the previous Budget. And, the entry-level segment will now have a six% excise duty, which, in turn, will increase the price. However, we have to go through the fine print before coming to any conclusion,” he added.

    “The market is significantly import oriented. Restructuring the excise duty could encourage local value addition, which is aligned to the national ICT & telecom objectives,” said Jaideep Ghosh, Partner, KPMG in India.

    By increasing excise duty on handsets costing more than Rs 2,000, the Government has earned more than Rs 2,000 crore additionally in the past year.

    India-made handsets to be cheaper, entry-level handsets may be dearer | Business Standard
     
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