Centre May Revise Customs Duties On Electronics To Boost Local Production And Component Sourcing: Report

by Bhaswati Guha Majumder - Jan 28, 2022 01:05 PM +05:30 IST
Centre May Revise Customs Duties On Electronics To Boost Local Production And Component Sourcing: ReportTechnicians assemble smartphones in Noida. (Udit Kulshrestha/Bloomberg via Getty Images)
Snapshot
  • As per the report, further reduction of customs procedures on consumer electronics and mobile phone components was being discussed by the government.

    The modifications are intended to stimulate local manufacture and increase local component procurement.

Center is likely to rejig customs taxes on consumer electronics and mobile phone components or sub-parts in the upcoming Union Budget, said a recent report.

According to one person familiar with the matter, the modifications are intended to stimulate local manufacture and increase local component procurement.

The source also told Hindustan Times that further reduction of customs procedures was being discussed and added that “the steps would make local production easier and lower the compliance burden".

To stimulate local production, the government is considering lowering import levies on components of audio devices and wearables such as smartwatches and smart bands, according to another unnamed second source.

On the heels of the success in mobile phone production and exports, this is expected to be one of the new industries where the government intends exports to pick up. According to the vision document released earlier this week by Communications and Information Technology Minister Ashwini Vaishnaw, the electronics component sector is expected to rise to $8 billion in FY26 from a negligible amount in FY21, while the exports are expected to nearly double to $17.3 billion from $9 billion in the same period.

Battery packs, chargers, USB cables, connectors, inductive coils, magnetics, and flexible PCBAs (printed circuit board assembly) can be manufactured in India with existing capabilities and modest policy support, according to the vision document on India becoming a $300 billion electronics manufacturing powerhouse by 2026, up from $75 billion now.

It was also said that India has a $25 billion component output potential, accounting for around 12 per cent of global spending.

The industry has endorsed the necessity for a programme similar to the production-linked incentive (PLI) scheme for components used in electronics and other goods. Between FY23 and FY26, the electronics industry recommended a phased strategy for levying basic customs duty on components such as printed circuit boards, batteries, speakers, mechanics, and cables, while lobbying for stable rates.

It had proposed that duty on printed circuit board assembly be reduced from 20 to 5 per cent in FY24, 10 per cent in FY25, and 15 per cent in FY26, with duties on other components remaining at 5 per cent in FY25 and 10 per cent in FY26.

It should also be noted that the global market for electronic devices is projected to be worth more than $2 trillion. From 1.3 per cent in 2012 to 3.6 per cent in 2019, that’s how much India's share of the global electronic systems manufacturing industry has increased.

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