Imported phones are set to get expensive. In a bid to boost Make in India, the government is considering imposing basic customs duty of at least 10% on smartphones that are imported, according to a report in the Economic Times.
This move will make imported devices more expensive than locally made ones.
ET reports that the move is expected to stimulate investments of more than Rs 1,000 crore. These are investments that have been on the fence for lack of clarity on price differential incentive, as India shifts to the goods and services tax (GST) regime.
Even though the current duty structure makes imported phones expensive than locally made ones, GST was said to even out that difference.
The centre is close to making this decision, which could be announced shortly before GST rollout, some officials in the ministries of commerce, revenue, and IT and electronics told ET.
"There have been discussions... We would take a call soon," a finance ministry official told ET.
However, Some feel the BCD on smartphones should be around 15% but a final decision is yet to be taken.
The ministry has also reportedly suggested a duty between 10% and 20% on some other electronic products.
This move, however will not affect companies like Foxconn and Wistron that have invested heavily in factories in the country.
Currently imported smartphones are 11.5% costlier than locally made handsets. This duty differential incentivised local manufacturing.
But a 12% GST rate on mobile phones would have wiped away the advantage.
More than 70 mobile phone and component companies currently make in India for the local market.
Most recently, contract manufacturer Wistron Corp entered the market, which makes the Apple iPhone SE at its Bengaluru plant.
The world's largest contract manufacturer Foxconn has also set up five assembly plants in Andhra Pradesh and is building another in Maharashtra.
The world's largest phone brand Samsung has announced an investment of Rs 5,000 crore to double mobile phone manufacturing by 2020.
ET reports that about 175 million handset units valued at Rs 90,000 crore were produced locally in FY17, up from more than 110 million handsets worth Rs 54,000 crore in the previous year, according to the Indian Cellular Association (ICA).
If there is an import duty imposed, this is expected to maintain the differential benefit, which could greatly benefit India, as India could become a manufacturing hub for many brands.