Mobile phones, chargers to cost less? What 5% BCD cut in Budget 2024 means for consumers

As part of the Union Budget 2024-25, Union Finance Minister Nirmala Sitharaman on Tuesday, July 23, proposed to reduce the basic customs duty (BCD) rates on imported mobile phones, mobile printed circuit board assembly (PCBA), and mobile chargers to 15 per cent from 20 per cent.

Presenting the budget in the Lok Sabha, Sitharaman said, “With a three-fold increase in domestic production and almost 100-fold jump in exports of mobile phones over the last six years, the Indian mobile phone industry has matured.”

As an incentive for the domestic electronics industry, the finance minister further proposed that the BCD levied on oxygen-free copper used to manufacture resistors be removed. Certain components involved in the manufacturing of connectors will also be exempted from the customs duty, as per the Union Budget 2024.

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However, the BCD rate has been hiked from 10 to 15 per cent for PCBA of specified telecom equipment in order to boost domestic manufacturing.

What is BCD and why has it been reduced?

Basic Customs Duty is an indirect tax that is levied on imported goods and it is usually calculated based on the assessment value of the product. It can vary from zero to hundred percent depending on factors such as the HSN code of the product as well as the country from where it is imported.

Goods that are imported under Free Trade Agreements (FTAs) are usually exempted from BCD which is revised from time to time by the Union Ministry of Finance.

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Any hike in customs duties generally sees smartphone companies pass on the cost to customers – unless they choose to absorb the cost for popular models, like Apple once did with the iPhone 11 in India.

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Hence, the government’s recent move could lead to a drop in prices of imported smartphones. Cutting BCD rates for mobile phones and other related parts has been a long-standing demand of handset makers as it could increase competition within the industry.

Arijeet Talapatra, CEO of handset maker Transsion India, said that the reduction in BCD would help foster a more competitive smartphone market while making the devices more affordable for consumers. Based out of China, Transsion Holdings is the entity behind smartphone brands Tecno, itel, and Infinix.

Meanwhile, Muralikrishnan B, the head of Xiaomi India, posted on X that he anticipated a surge in consumer spending, including increased smartphone demand, due to the announcements made as part of the 2024 Budget.

The custom duty reduction could also lead to growth in India’s wearables market, said Varun Gupta, co-founder of smartwatch and earbuds company Boult.

In February, the government had slashed the BCD to 10 per cent for several mobile phone components such as battery cover, front cover, middle cover, main lens, back cover, and more. Additionally, the Union Budget for 2023-24 saw a reduction in customs duty on imported camera lenses as well as lithium-ion battery cells and parts of open cells of TV panels.

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Have the demands of the industry been met?

Ahead of the Budget, the India Cellular & Electronics Association (ICEA) had recommended that the Indian government rationalise input duties on mobile phone parts and sub-assemblies. It pointed out that India has the highest tariffs on inputs when compared to other economies such as China and Vietnam.

“High tariffs on inputs increase costs, making Indian industry less competitive, and hindering its ability to join GVCs [Global Value Chains]. This discourages GVCs from shifting to India. Competitiveness is critical to building scale and attracting FDI which in turn, positively impacts domestic value addition and job creation,” the industry body said in a statement.

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While the reduction in BCD on mobile phones, mobile PCBAs, and chargers is in accordance with what the ICEA had called for, it had also suggested a reduction in duty on mobile phone mics and receivers from 15 per cent to 10 per cent. Additionally, the ICEA had demanded customs duty exemptions for sub-assembly parts and inputs (like PCBA parts, connectors, camera modules, etc).

“These tariffs don’t serve any purpose. They fail to build a domestic industry while increasing costs, complexity and compliance for legitimate manufacturers,” the Delhi-based industry association said.

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