Budget impact: Mobile phone prices may go up

Written by PTI | New Delhi | Updated: Jul 11 2014, 03:41am hrs
SmartphoneConsumers may have to shell out more money for buying mobile phones.(Reuters)
Consumers may have to shell out more money for buying mobile phones as the government has proposed education cess on imported electronic products.

The move may push up costs of cell phones by up to 8 per cent, especially smartphones that are mostly imported, analysts said.

Presenting his maiden Budget today, Finance Minister Arun Jaitley said the demand for electronics is growing very fast.

He said the government will "exempt all inputs/components used in the manufacture of personal computers from 4 per cent special additional duty (SAD) and impose education cess on imported electronic products to provide parity between domestically produced goods and imported goods".

According to the Budget document, the education cess for all taxpayers will be 3 per cent in the 2014-15 fiscal.

Reacting to the proposal, IDC South Asia VP and General Manager Jaideep Mehta told PTI: "The education cess on imported electronics, including PCs and Smartphones, will challenge consumption growth as it will increase street prices."

Greyhound CEO Sanchit Vir Gogia said manufacturing is still in nascent stages in India.

"There is hardly any manufacturing that is done in the country. Considering that most handsets are imported and add to that the education cess, we could see prices going up as much as 7-8 per cent," he added.

Handset makers including Microsoft Devices (Nokia) and Micromax however did not comment on the impact on prices.

The Budget proposals state imposition of basic customs duty at 10 per cent on specified telecom products that are outside the purview of the Information Technology Agreement.

India is signee of Information Technology Agreement 1 as a member of World Trade Organisation. Under the pact, member countries should allow duty free import of 217 products falling under eight categories covering telecom, computers and electronic chips.

When contacted, Microsoft Devices spokesperson said the company is still in the process of going through the fine print.

However, LAVA International Chairman and Managing Director Hari Om Rai said there may not be any adverse impact on pricing for consumers as the additional education cess was on imported electronic products.

"We do not feel there will be any cost passed on to the consumer due to the additional education cess on imported electronic products. However, we are assessing the details of the budget announcements and necessary steps will be taken if and when required," he said.

Lauding the government's efforts in promoting domestic manufacturing, Rai said the "positive intent" will benefit the telecom and handset industry and firms like Lava International which are now looking to tap India's manufacturing potential.