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Union Budget
Union Budget 2018: Smartphones set to become costlier as govt raises customs duty
The Central government has proposed to increase the customs duty on smartphones from 15 per cent to 20 per cent that will make mobile phones more costlier than before.

It means that prices of smartphones are going to soar up considerably by next month when the new budget laws come into force.

The government proposed the move while announcing the Union Budget for the fiscal year 2018-2019, that was tabled by Union Finance Minister Arun Jaitley in the Lower House of the Parliament today.

However, the new move will be making only those smartphones more expensive which are imposed with custom duty, i.e. all smartphones that are imported from foreign countries.

"The increase in customs duty on mobile phones would incentivize manufacturing of these phones in India, however the value addition in India may continue to be lower. In the short run, the prices of phones may go up but in the long run there would be an incentive to manufacture the entire supply chain in India, given the duty on components too," said Bipin Sapra, head of indirect tax at consultancy EY.

In the last 12 months, it would be the third instance when the custom duty on smartphones has been raised by the Central government. In February 2017, the government had imposed 10 per cent import duty which it increased to 15 per cent in December and now, it has been increased up to 20 per cent.

Interestingly, the domestic handset makers have welcomed the move and appreciated the reform by saying that the duty increase will make India a hub for smartphone manufacturing.

"Local manufacturing will create more job opportunities, benefiting the youth and contributing towards the overall growth of the economy," said Sanjeev Agarwal, chief manufacturing officer at Lava International.

The new budget reform is also likely to lead to rise in prices of Voice over Long-Term Evolution (VoLTE) supported feature phones, most of which are being imported from outside at present.

"Increase in customs duty will impact the pricing of VoLTE phones, thereby impacting their overall penetration, which the telecom industry is banking on in order to increase revenue from data services," said Mritunjay Kapur, head of telecom, media and technology at KPMG India.

However, many experts believe that this step has been taken by the Centre to promote its flagship scheme 'Make in India' that encourages domestic companies to manufacture their products in India, especially in the field of electronics.

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