One of the key highlight of the vote on account announcement today by Finance Minister of India is- Excise duty on mobile handset to be 6 pc on CENVAT credit to encourage domestic production.
“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,” Finance Minister P Chidambaram said while presenting the Interim Budget 2014-15. “The rates will be 6% with CENVAT credit or one cent without CENVAT credit,” he added.
According to Economic Times, with this announcement,mobile phones manufactured in India could see price moderation. However, a majority of mobile phones sold in India, even by domestic firms like Micromax, Lava and Karbonn, are imported. Samsung and Nokia have manufacturing facilities in the country and the excise duty rejig may lower their cost of production.
The Indian mobile handset market is one of the largest and amongst the fastest growing in the world with about 250 million handsets being sold annually. Despite this huge opportunity, domestic manufacturing of handsets has not had any reason to cheer, with about 80% of the handsets sold in the country being imported.
Reacting to this announcement, Sumit Goswami, CEO of KeyPoint Technologies said, “We welcome the announcement of restructuring the excise duties on mobile handsets to six percent for all categories. This move will surely encourage the domestic production of mobile handsets and will offer a greater boost to develop the domestic mobile capabilities.”
“We look towards this announcement as a positive policy measure as greater domestic production will create a positive demand for localized content, which will drive the local content generation on smart devices towards an optimistic future. The local content generation on smart devices will definitely receive a great impetus with this announcement as an expected reduction in mobile handset prices will lead to a greater penetration of mobile services into the interiors of the country thus leading to a greater demand of local language apps. As device UI is an integral part of the mobile technology of today, we expect that greater penetration of mobile devices in the country will drive a positive demand for localization and regional content.”
Mr. Sanjay kumar Kalirona, Business Head-Mobile, Intex, has reacted in following words:
“In the context of the recent Union Budget revelations, the revision of excise duties on mobile handsets is a visionary step toward ramping up domestic manufacturing. Looking at the present scenario, the rise in excise duty, for the sub-2k category, to 6 percent with CENVAT credit, from 1 percent the year before could lead to an increase in the overall cost of mobile phones priced below Rs. 2000 as mobile handsets are largely imported. We at Intex will continue to provide innovative, world-class features and services to our customers, and develop sustainable capabilities with our stakeholders even as we adapt to current regulatory changes.”