Telecom Budget: Will smartphone price go up?

Finance Minister Arun Jaitley’s decision to propose 3 percent education cess on imported electronic products may push up costs of handsets by up to 8 percent, especially smartphones that are mostly imported.

Pankaj Mohindroo, national president of Indian Cellular Association (ICA), has lauded the bold initiative of the Finance Minister Arun Jaitley to Protect and Promote Mobile Manufacturing.

However, the ICA National President has said that the applicability of education cess on the Countervailing Duty on imports is a negative move. The measure is confined only to the electronics sector and the fresh move is on the ground for creating equity between indigenous production and imports. He called for removal of the cess for the sector on grounds of simplification.

Presenting his maiden Budget today, Finance Minister Arun Jaitley said the BJP government will “exempt all inputs / components used in the manufacture of personal computers from 4 per cent special additional duty (SAD) and impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods.”

According to the Budget document, the education cess for all taxpayers will be 3 per cent in the 2014-15 fiscal, PTI reported.

IDC South Asia VP and General Manager Jaideep Mehta said: “The education cess on imported electronics, including PCs and Smartphones, will challenge consumption growth as it will increase street prices.”

Young people texting on phones

Greyhound CEO Sanchit Vir Gogia said manufacturing is still in nascent stages in India. “There is hardly any manufacturing that is done in the country. Considering that most handsets are imported and add to that the education cess, we could see prices going up as much as 7-8 per cent,” he added.

Handset makers including Microsoft Devices (Nokia) and Micromax however did not comment on the impact on prices.

The Budget proposals state imposition of basic customs duty at 10 percent on specified telecom products that are outside the purview of the Information Technology Agreement.

India is signee of Information Technology Agreement 1 as a member of World Trade Organization. Under the pact, member countries should allow duty free import of 217 products falling under eight categories covering telecom, computers and electronic chips.

Microsoft Devices spokesperson said the company is still in the process of going through the fine print.

However, LAVA International Chairman and Managing Director Hari Om Rai said there may not be any adverse impact on pricing for consumers as the additional education cess was on imported electronic products.

“We do not feel there will be any cost passed on to the consumer due to the additional education cess on imported electronic products. However, we are assessing the details of the budget announcements and necessary steps will be taken if and when required,” he said.

Rai said the positive intent will benefit the telecom and handset industry and firms like Lava International which are now looking to tap India’s manufacturing potential.

editor@telecomlead.com