The Central Board of Excise and Customs (CBEC) has restored the sharp duty differential between locally-produced mobile phone handsets and the imported ones by clarifying that importers cannot pay countervailing duty (CVD) at the same rate as the concessional 1% excise duty rate applicable on ‘made in India’ phones.
According to a July 17 notification by the CBEC, importers have to pay countervailing duty at 12.5%, the same rate at which domestic producers pay excise duty when cenvat credit on raw materials and capital goods are claimed. The benefit of the concessional 1% duty is strictly restricted to locally-produced phones on which no credit for taxes on inputs or capital goods are claimed.
The CBEC clarification said that this concessional rate cannot be claimed by importers for paying
their countervailing duty liability, which is at par with the normal 12.5% excise duty.
The clarification reinstates prospectively the 11.5% duty differential that the government wants to give to locally-produced phones.