Telecom budget 2014-15: Mixed response to excise duties on mobile handsets

Indian telecom industry has shared mixed response to the government’s new initiative on excise duties on mobile handsets that will be restructured to 6 percent for all categories. 

According to a PTI report, the initiative will spur domestic manufacturing.

Mobile phones manufactured in India could also see price moderation with the finance minister announcing a proposal to boost domestic manufacturing. However, a majority of mobile phones sold in India, even by domestic firms like Micromax, Lava and Karbonn, are imported.

However, Samsung and Nokia have manufacturing facilities in the country and the excise duty rejig may lower their cost of production.

Jaideep Ghosh, partner, KPMG in India, said: “Mobile handset market in India at currently at 220 million annual sales, and growing rapidly especially in the smart-phone segment. However the market is significantly import oriented. Restructuring the excise duty could encourage local value addition, which is aligned to the national ICT & telecom objectives.”

“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 6 percent with CENVAT credit or one percent without CENVAT credit,” said Finance Minister P Chidambaram said while presenting the Interim Budget 2014-15.

Phone making India


While Indian Cellular Association National, a telecom industry body for the development of mobile handset industry, welcomed the move, ELCINA said the initiative is not significant for phone sector in India.

“I would like to thank Finance Minister for the attention to mobile handset segment. We have to go through the fine print before coming to any conclusion,” said Indian Cellular Association National president Pankaj Mohindroo.

Electronic component manufacturer association ELCINA said the announcement does not look promising for domestic firms.

“At first glance, I think it is not going to be a disincentive to trading. One percent credit without CENVAT credit is too less,” said ELCINA Secretary General Rajoo Goel.

As part of last year’s budget, the government had raised the excise duty to 6 percent on handsets priced above Rs 2,000.

Please read: India smartphone market share 2013: Samsung 32%, Micromax 21%, Karbonn 11%

Last month, ICT research agency Canalys said India’s smartphone shipments reached 11,350,530 units in 2013. Earlier, IDC said telecom markets such as India and China are looking for sub-$150 smartphones.

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