Mobile phones may become cheaper as duty on chargers cut

Mobile handsets could be marginally cheaper with the Finance Minister announcing tax exemptions for chargers, batteries and accessories.

Finance Minister Pranab Mukherjee said full exemption from basic customs duty and CVD available for parts, accessories for manufacturing of mobile handsets is extended to parts for manufacture of battery chargers and hand free headphones also.

Full exemption from the 4 per cent special additional duty (SAD) of customs is presently available up to July 6, 2010.

Exemption from basic customs duty, CVD and SAD on parts of battery chargers and hand-free headphones is available until March 2011, he said.

Indian Cellular Association (ICA), an industry body, welcomed the development.

Its national president Pankaj Mohindroo said, "Cellular handset makers are pleased, especially on account of the exemption of 4 per cent SAD, which was resulting in working capital blockage. Such exemption signals the government’s renewed focus on manufacturing the mobile phone, and now also its parts, components and accessories."

Country's number one mobile handset seller Nokia said the Budget has removed the 24 per cent import duty on components, raw material imported for manufacturing batteries, chargers and other part and accessories. The will attract more investment in this area and encourage domestic manufacturing of parts and accessories.

Nokia further said the move towards exempting the 4 per cent SAD on import of mobile handsets is also a welcome step. This duty was hitherto refundable on payment of VAT; this step will make the entire process of handset imports much simpler, facilitating better cash flow in the industry.

Mahindroo said the dispensation to exempt manufacturers of mobile phone battery packs, chargers and hands-free headphones from custom duty will also encourage the likes of Nokia, LG, Samsung, Sony-Ericsson and Motorola to source such items from India which will create a whole new local manufacturing.

Samsung, country's second largest mobile handset seller, however, said there would be no impact on the price for the end customer as the cut is very small.

Most of the mobile handset makers usually import the device from China or Korea as it provides them economies of scale.

Homegrown handset maker Karbonn and Zen said they would pass on the benefits of the tax exemptions to their customers.

"We as a company look forward to pass on the benefits to our customers," Pradeep Jain, Managing Director, Karbonn Mobiles.

Deepesh Gupta, MD of Zen Mobiles, said battery chargers and hands-free headphones are the basic accessories of mobile phones and extending exemption from duty presently available for parts, components, accessories for manufacturing of mobile handsets to parts for the manufacture of battery chargers and hands-free headphones, will lower the cost of handsets.

COAI, industry body representing the GSM operators, said that the continuation of exemption from basic, CVD and special additional duties (SAD) granted to parts, components and accessories of mobile phones would help towards penetration of mobile service into rural areas.