Budget 2012 has good news for indigenous handsets manufacturers but bad news for mobile users in India. Finance Minister Pranab Mukherjee announced to retain excise duty of one per cent on mobile phone. He also announced to reduce excise duty on parts of mobile phones, other than those cleared to a manufacturer of mobile phones, from 10 % to 2 % only in cases where the no central VAT credit is taken by manufacturer.
The government has also announced to exempt parts of memory cards from basic customs, countervailing and special addition duty (SAD), the benefit which given to parts, components and accessories for manufacturing of mobile handsets.
“Exemption of mobile phone parts from basic custom duties which while bringing down the manufacturing cost of mobile phones will aid in deeper penetration of mobile phone manufacturers into the untapped portions of the Indian market,” Karbonn Mobiles Managing Director Pradeep Jain said.
Lava Mobile said that government’s announcement to allow deduction of 200 % tax liability on expenditure made in research and development will boost growth of home grown handset companies and generation of Indian Intellectual Property Rights.
On the other hand, the Minister has also proposed to hike the basic excise duty from 10 % to 12 %. However that will not affect the prices of mobile phones, majority of which are imported, as mobile phones which will continue to pay excise duty of 1 % like previous financial year because they come under special category along with coal, fertilisers and precious metal jewellery.
But mobile and telephone bills are set to get costlier as Union Finance Minister Pranab Mukherjee has proposed an increase of service tax to 12 % from the current 10 % in his budget presentation in Lok Sabha. The hike in service tax would affect more than 800 million pre paid and post mobile subscribers and landline users.