Budget raises mobile phone prices, leaves telecom industry cellshocked

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Mobile phones are set to get costlier by 4-5% as the finance minister, P Chidambaram on Friday announced imposition of a 1% excise duty on all handsets with immediate effect.

The new duty is the national calamity contingent duty (NCCD), the proceeds of which is used towards providing relief and rehabilitation in areas struck by natural disaster.

Bharat Bhatia, regional director, Motorola Global Government Affairs and Public Policy India, Saarc and South East Asia, said, “In terms of monetary implications, this is not so much a problem for the mobile manufacturers. But the process will require a lot of complexity in terms of paper work, which will lead to extra costs to the tune of 4-5%.”

The additional cost involved in the administrative processes will ultimately be passed on to the mobile phone buyers. Indian Cellular Association president Pankaj Mohindroo also agreed that levying 1% excise duty would increase the prices of mobile handsets.

The national calamity contingent duty was levied through the Finance Act 2003 as a surcharge on certain specified imported good. This tax is leviable on petroleum crude oil, polyester filament yarn, motorcars, imported multi-utility vehicles and two wheelers.

In the budget tabled on Friday, the finance minister withdrew the 1% duty levied on polyester filament yarn and shifted it to mobile phones.