Govt cuts import duty on smartphone components, spare parts to 10% from 15%

Analysts expect the move to drop smartphone prices by 3%, especially in the entry-level segment

Ahead of the Budget, the government reduced import duties on smartphone components and spare parts to 10 per cent from 15 per cent earlier. The Ministry of Finance (MoF) announced this in an official gazette notification on January 30.

As part of the revision, tariffs on components such as battery covers, antennas, sealing gaskets, sim sockets, and others, included under the mechanics category, have been reduced. Similarly, import duties on die-cut components like LCD foam, conductive cloth, and sticker-battery slots, among others, have been slashed to 10 per cent.

Moreover, the import duty on inputs used to manufacture these components has been cut to zero. Parts like adhesive, steel sheet, and logo will have zero input duties, according to the official notification.

Union Minister of Electronics and IT Ashwini Vaishnaw said that the rationalisation of customs duties will bring much-needed certainty and clarity for the industry.

“I thank Hon’ble PM Narendra Modi Ji and FM Nirmala Sitharaman Ji for strengthening the mobile phone manufacturing ecosystem through this measure," he wrote in a post on X.

The cut comes as companies from the sector have been requesting such measures to bring India to a level playing field when compared to other countries.

The reduction in import duties is seen as an attempt to boost manufacturing in the smartphone segments. Analysts also shared that this will help the smartphone industry generate demand, which has been low for the past two years, especially in the entry and budget segments.

According to analysts, the move will allow original equipment manufacturers (OEMs) to reduce costs, which will, in turn, be passed on to end consumers.

“The move can help to drop smartphone prices by around 3 per cent, empowering consumers and making the devices more affordable, especially in the entry and budget segments. These segments were the worst hit by currency fluctuations and have witnessed price rises in the past year,” said Prachir Singh, Senior Analyst at Counterpoint Research.

As a result, the entry-level and budget smartphone segments are expected to witness growth over the next few quarters.

The reduction in import duties is not likely to affect domestic manufacturing either.

“On the overall components’ localisation drive, we believe that this move will not have an adverse impact, as it is an ongoing process,” Singh said.

Smartphone makers have welcomed the move, saying it will bolster local manufacturing of components.

“The import duty reduction in mechanics and other small parts is a welcome move and will help bridge the duty gap, which can provide a further boost for local manufacturing of such components,” said Muralikrishnan B, President of Xiaomi India.

He added that, over time, such moves will help accelerate domestic value addition and facilitate India's growth as an electronic manufacturing destination.

A Realme spokesperson said: “This will be a big boost for smartphone manufacturing companies, including Realme, that are committed to 'Make-in-India'. This will ensure that we continue providing innovative smartphones at multiple price points to cater to the varied and emerging needs of Indian consumers."

Queries sent to Samsung and OnePlus did not elicit an immediate response.

Earlier this month, the India Cellular and Electronics Association (ICEA) urged the government to reduce tariffs to improve India's competitiveness in smartphone manufacturing globally, after a study by the industry body found India’s tariff rates to be the highest amongst seven countries surveyed, including China and Vietnam.

Tariffs on smartphone components in countries like China and Vietnam are less than 10 per cent.

“The adjustment of Basic Customs Duty (BCD) to 10 per cent on parts of mobile phones and mechanics and die-cut parts and zero per cent on inputs of mechanics represents the start of a paradigm shift in the policy orientation of the government towards export-led growth and competitiveness,” said Pankaj Mohindroo, Chairman of ICEA.

“Building scale, riding on low input tariffs is key to transforming India into a global hub for electronics manufacturing and exports,” he added.