India Cuts Import Duty on Mobile Phone Components from 15% to 10%

February 1, 2024 Posted by India Briefing Written by Melissa Cyrill Reading Time: 2 minutes

The finance ministry of India announced import duty cuts in a bid to make the country’s mobile phone manufacturing more competitive. The notification came two days before the interim budget announcement.

India has taken steps to bolster local mobile phone manufacturing by decreasing the import duty on mobile phone components.

Import duty has been reduced from 15 percent to 10 percent on mobile phone parts like battery covers, main camera lens, back cover, other mechanical items of plastic and metal, GSM antenna, SIM socket and screws, as well as die-cut parts such as conductive cloth and LCD conductive foam, and other parts. Further, import duty on inputs that are used to manufacture these components has been cut to zero, per the finance ministry. See here for the official notification on the Central Board of Indirect Taxes and Customs.

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The import tariff reduction is poised to favor companies like Apple and its original equipment manufacturing (OEM) supplier network and Dixon Technologies, which manufactures mobiles for Motorola, Samsung, and Xiaomi. The customs duty cuts could even result in a 3-5 percent price reduction for entry-level products, boosting domestic consumer demand. On this point, market tracker IDC has held a more conservative view as it believes that there won’t be a substantial impact on prices due to the exclusion of some key components from the duty cut.

The India Cellular and Electronics Association (ICEA), which represents Apple, Dixon Technologies, and other leading mobile phone makers, previously presented a report that compared import duties across six manufacturing countries, including India, China, and Vietnam. In the report, they highlighted a significant cost disadvantage to Indian phone makers and consumers caused by high tariffs on input parts. India was found to have the highest tariffs at 8.5 percent on average while China reported an average 3.7 percent tariff and Vietnam tariffs were an average 0.7 percent.

The government is keen to encourage further shifting of production lines to India as export-oriented smartphone manufacturing has been one of the success stories of the production-linked incentive (PLI) schemes. Slashing the import duty on inputs for mobile component manufacturing will incentivize global brands to set up more large scale mobile phone assembly lines in India, further increasing exports.

Rationalization of customs duties brings much-needed certainty and clarity for the industry. The measure will strengthen the mobile phone manufacturing ecosystem in India. – Ashwini Vaishnaw, Union Minister of Electronics and Information Technology

The ICEA highlighted that the customs duty on components categorized as “others” had been increased from 5 percent to 15 percent in 2018, resulting in misinterpretations and unintended complications for the industry. The recent notification rationalized the duties of components in this category to 10 percent.

Exports jump of smartphone shipments

In the fiscal year 2023-24, India’s electronics exports surged by 22.24 percent, surpassing US$20 billion within nine months. Notably, mobile phone exports constituted 52 percent of the total electronics exports, totaling US$10.5 billion from April to December 2023. Apple and its contract manufacturers, which include Foxconn, Wistron (now under Tata Group ownership), and Pegatron, were instrumental in driving the growth of mobile exports. iPhones alone accounted for 35 percent of total electronics exports and an impressive 70 percent of the country’s overall mobile exports during this period, with December 2023 witnessing iPhone exports exceeding US$7 billion. Looking ahead, the industry targets US$50 billion in exports and advocates for policy interventions to expand global value chains, foster ecosystems, and enhance domestic value addition.

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