New Delhi, July 23, 2024 — In a significant move aimed at boosting the domestic electronics industry, Finance Minister Nirmala Sitharaman announced a reduction in the basic customs duty (BCD) on imported mobile phones, mobile printed circuit board assemblies (PCBA), and mobile chargers from 20 percent to 15 percent. The announcement was made during the presentation of the Union Budget 2024-25 in the Lok Sabha on Tuesday.

Sitharaman highlighted the remarkable growth of the Indian mobile phone industry, stating, "With a three-fold increase in domestic production and almost a 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured.”

Additional Incentives:
The finance minister also proposed the removal of the BCD on oxygen-free copper used in the manufacture of resistors. Furthermore, specific components used in making connectors will now be exempt from customs duty, providing further incentives for the domestic electronics sector.

Understanding BCD and Its Reduction:
Basic Customs Duty is an indirect tax levied on imported goods, typically calculated based on the product's assessed value. The rate can range from zero to 100 percent, depending on various factors such as the Harmonized System of Nomenclature (HSN) code and the country of origin. Goods imported under Free Trade Agreements (FTAs) are usually exempt from BCD, with rates periodically revised by the Union Ministry of Finance.

Reducing BCD rates on mobile phones and related components has been a long-standing demand of handset manufacturers, as it can lower prices and increase competition within the industry. Historically, increases in customs duties have led smartphone companies to pass on the costs to consumers, unless they absorb the costs for popular models, as Apple did with the iPhone 11 in India.

Potential Impact:
The government's decision to cut BCD rates is likely to lead to a reduction in the prices of imported smartphones, benefiting consumers. This move is expected to further stimulate competition within the mobile phone industry, encouraging innovation and expansion.

Earlier this year, the government reduced the BCD to 10 percent for several mobile phone components, including battery covers, front covers, middle covers, main lenses, and back covers. The Union Budget for 2023-24 also saw reductions in customs duties on imported camera lenses, lithium-ion battery cells, and parts of open cells for TV panels.

With these comprehensive measures, the Union Budget 2024-25 aims to fortify the domestic electronics manufacturing ecosystem, enhance the affordability of smartphones, and drive further growth in India's burgeoning mobile phone industry.

Industry Reaction:
"We welcome the Budget 2024 announcement to reduce BCD on mobile phones, PCBA and chargers, while simultaneously extending exemptions on inputs/raw materials for smartphone manufacturing, capital goods, and inputs for capital goods in the electronics industry. At Xiaomi India, we have been manufacturing nearly 100% of our smartphones locally with a strong emphasis on sourcing components like PCBA, charging cables, camera modules, and mechanics, among others. Today's announcement will help further strengthen the domestic electronics manufacturing ecosystem. The proposal for a comprehensive review of the tariff rate structure is another positive step that will further strengthen the industry." - Muralikrishnan B, President at Xiaomi India.