Budget impact: Companies bat for Customs duty rollback on ACs, TVs

Customs duty on ACs imported completely is 20%, following a 10% increase in September last year

The government might roll back the hike in Customs duty on ACs and TVs as pressure from companies grows.

Finance Minister Nirmala Sitharaman, in the Budget presented last Friday, had hiked the Customs duty on indoor units and outdoor units of ACs by 10 per cent, taking the total to 20 per cent each.

The move has prompted companies to lobby with the government, with industry body the Consumer Electronics and Appliances Manufacturers Association (CEAMA) making representations.

Customs duty on ACs imported completely is 20 per cent, following a 10 per cent increase in September last year. Customs duty on compressors, a key component in ACs, was hiked to 10 per cent from 7.5 per cent.

Duty on open-cell panels, a key component in TVs, was reduced to 5 per cent from 10 per cent after being raised from zero to 10 per cent in December 2017.

While the government has said that the duty hike across parts is aimed at aiding domestic manufacturing, companies have argued that slapping duties on components that are not available in the country does not serve the purpose. Instead, it increases their cost of production.

“The capacity for AC compressors is not much in India, given the size of the AC market, at 6.5 million units. While outdoor units are made in the country, indoor units of ACs are not and continue to be imported by a few companies,” said Kamal Nandi, executive vice-president and business head, Godrej Appliances.

Nandi is also the president of the CEAMA.

The import content in ACs remains the highest among home appliances in the country, ranging between 25 per cent and 50 per cent, according to industry estimates. Apart from compressors and indoor units, outdoor units for high-end AC models, copper coils, and parts going into the circuitry of ACs are all imported.

In the case of TVs, open-cell TV panels make up about 70 per cent of its cost of production, said industry experts. Even a 5 per cent duty hike affects the cost of production significantly.

Samsung has already stopped making TVs in India, saying it is cheaper to import from Vietnam and Thailand, countries with which India has free-trade agreements. LG, too, has expressed its inability to manufacture TVs in the country, with duty on open cell TV panels continuing.

“The industry has been demanding that duty on open cells be brought down to nil and we are hoping the government will look into this on a priority basis,” said Eric Braganza, president, Haier Appliances India.

Avneet Singh Marwah, chief executive officer, SPPL, brand licensee for Thomson and Kodak TVs in India, said, “We were also expecting a reduction in Custom duties on open cells, as TVs imported under FTAs have generated revenue of more than Rs 4,500 crore, which in turn, is affecting the Make in India programme. Secondly, an expectant cut in the GST (goods and services tax) rate for televisions of 32 inches and above has not happened from 28 per cent to 18 per cent. These measures are required to make the local industry competitive.”

ACs, too, continue to attract a 28 per cent GST, the highest rate.