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The Central Board of Excise and Customs (CBEC) has issued a notification amending the import duty on mobile phone components like chargers, batteries and wired headsets, down to 12.5%. The import duty was increased during the Budget 2016-17 to 29.44% to include 10% custom duty, 12.5% countervailing duty and 4% special attention duty.

Importers will now only have to pay the 12.5% countervailing duty, as the other duties have been revoked. Other parts or components used in the manufacture of broadband modems, routers, set top boxes for internet access, lithium-ion batteries for other than mobile handsets, digital video recorders, network video recorders and CCTV cameras will also benefit from reduced duty.

This move should help manufacturers assembling complete sets in India keep their costs down. Currently, a completely packaged phone (accessories et al.) faces a 12% duty to import, for example Apple importing iPhones. The budget announced duty increase would leave such companies unaffected, instead penalizing those that choose to finish the packaging in India, like Xiaomi, Micromax and Samsung do.

Various companies are currently looking to, or are already manufacturing or assembling phones in India. The increased tax would have forced these companies to either import fully packaged products, manufacture entirely in India, or increase the price of the handsets. As such, the move to revert taxes to 12% should keep most phone manufacturers happy.

Manufacturing in India: The Indian government has been encouraging domestic companies to start manufacturing electronics goods within the country instead of importing them and had approved a National Policy on Electronics. Since then, various smartphone manufacturers have said they will start manufacturing in India or have already started doing so.

– Last month, Micromax inaugurated a manufacturing plant in Telangana. The same month, Oppo said it would set up a manufacturing unit in Noida with an investment of Rs 100 crore.

– In November, Optiemus Infracom, the founder of the domestic mobile brand Zen Mobile, signed a joint venture with Wistron Corporation to set up a mobile manufacturing unit in Noida.

– Various manufacturers have tied up with Foxconn to manufacture phones in India. In November, Oppo started contract manufacturing in India in partnership with Foxconn while in September, Gionee tied up with Foxconn and Dixon to manufacture its phones in India. In June, the company started making Xiaomi phones in the country.

– The month before, Foxconn was in talks with Adani Enterprises to form a joint venture (JV), likely to make iPhones in India. The company had first reported in June that it could possibly set up base in India to manufacture iPhones, iPads and iPods for Indian and international sales.

– In August, Lenovo started the local production of smartphones with Flextronics under a contract manufacturing deal at its Sriperumbudur plant.

– Videocon Mobile Phones, Videocon Group’s mobile company, started manufacturing mobile phones in the country.

Also read: Should royalty be paid for government taxes, duties and marketing? – SpicyIP