Mobile phone makers seek tax exemption on capital goods, display parts

Mobile phone firms have sought a customs duty reduction on mobile parts like microphones, printed circuit boards, and wearables, as well as tariff correction on capital goods and other components, to lower the handset production cost, industry body ICEA said in its budget recommendations.

The mobile phone makers' body has suggested that the government rationalise duty on capital goods, citing recent restrictions imposed by China that threatened local production of mobile phones.

"With China's recent export restrictions on manufacturing machinery increasing supply-chain risks, India's dependence on imported equipment has become a strategic vulnerability. It is, therefore, recommended that the government extend the existing zero-duty benefit on capital equipment to all constituent components, sub-assemblies, and assemblies imported specifically for their manufacture," ICEA said.

 

India Cellular and Electronics Association (ICEA), whose members include Apple, Foxconn, Dixon, Xiaomi, Vivo, and Oppo, said the move will eliminate the inverted duty structure and foster a self-reliant and globally competitive capital equipment ecosystem in the country.

The mobile phone industry dominates the country's electronics manufacturing sector at present.

According to industry estimates, more than 25 lakh people are employed in the electronics sector.

ICEA estimates that mobile phone production in the country is expected to reach USD 75 billion (about Rs 6.76 lakh crore), comprising exports of over USD 30 billion, or about Rs 2.7 lakh crore, by the end of the current fiscal year.

Mobile phones worth Rs 5.5 lakh crore were produced in the country, and exports from the segment were around Rs 2 lakh crore in 2024-25.

The industry body said that certain critical and specialised machinery required for mobile phone and lithium-ion cell manufacturing remain outside the scope of existing customs duty exemption notifications, even though the Union Budget 2025-26 extended exemptions to various such capital goods.

The omission of these machines results in higher project costs and incomplete coverage of end-to-end manufacturing lines, it added.

ICEA said that the excluded machines are custom-built for lithium-ion cell and mobile phone manufacturing, not generic equipment, and are indispensable for completing the full production sequence.

"These machines are not manufactured domestically, and their import attracts significant duties, raising capital expenditure by 7.520 per cent.

"Global supply constraints and China's export restrictions on key battery materials have heightened the urgency to build self-reliant domestic capacity. Extending exemptions will lower setup costs, accelerate commissioning, enhance export competitiveness, and create employment across the energy-storage ecosystem," ICEA said.

The industry body has also demanded extending import duty exemptions to lithium-ion cell manufacturing machinery.

It has requested the government to rationalise the tax structure for the display or the screens used by various devices, including those used on the dashboard of automobiles.

It has recommended to impose a 15 per cent import duty on all sorts of display assemblies used in the manufacturing of electronic goods, while exempting all components that are used for manufacturing them from the basic customs duty to boost their local production.

ICEA has demanded a reduction of import duty on printed circuit board assembly (PCBA) that forms the base of electronic circuits from 15 per cent to 10 per cent to make the local market more competitive.

"As PCBA manufacturing is already well localised, a duty reduction will not adversely impact domestic producers. Instead, it will enhance India's cost competitiveness, promote fair market practices by discouraging arbitrary pricing behaviour, and further strengthen the domestic electronics manufacturing ecosystem," the industry body said.

The mobile phone makers' body has demanded a reduction of basic customs duty on finished Hearables and Wearables from 20 per cent to 15 per cent, which will make the imported audio devices cheaper.

"A moderate reduction will not adversely affect domestic manufacturing but will enhance India's image as a progressive, market-oriented economy. The 15 per cent rate reflects India's shift toward a uniform and moderate peak tariff structure, promoting market access, scale, and affordability," ICEA said.

The industry body has also urged the government to fix a uniform wastage norm of up to 2 per cent of input quantity for finished mobile phones and their parts, which should be treated as normal manufacturing loss and should not attract duties.