Finance Minister Arun Jaitley presented the Union Budget on February 2, and a lot of focus went to Digital India and Make in India. With an aim to further the push for local manufacturing, the finance minister introduced a Special Additional Duty (SAD) on the import of PCBs. PCBs or Printed Circuit board is one of the important parts of smartphone manufacturing and now there is a SAD of 2 percent of their import. This move could increase the price of the smartphones, as PCBs cost around half the phone’s value.
Meanwhile, since the 2 percent per unit might not be much to hold value, together with the number of phones manufactured in India, will cost the companies a lot. This move was taken keeping in mind the local manufacturing of PCBs as such duties provide protection to the domestic industry. This decision according to several analysts and manufacturers will also help to put added emphasis on Make In India program. The government, clearly wants manufacturers to make components locally. However, many analysts said that there will be only a marginal increase in the price of the smartphones, nearly 1 percent.
Bipin Sapra, Partner – Indirect Tax, EY said, “The PCB is the most crucial component of the mobile phone being 40 to 50 percent of the selling price of the phone. This means roughly 1% increase in the price of the phone on account of this levy of SAD of 2 percent on PCB. The move will incentivize domestic manufacturing of PCBs which has been a long-standing demand of this Industry and will also bring Value addition in mobile phone manufacturing in India.”
To further initiatives towards local manufacturing in the country, the government announced an increase in budget allocation of schemes like mSIPS and EDFs to Rs 745 crores for this year.
Narendra Bansal, Intex’s Chairman and Managing Director, said the special additional duty will have no impact on the consumer at all. He explained that the increase is so small “that brands will absorb this impact and will not pass it on to the consumer.” The only issue is that even with the Make in India initiative, most of the manufacturers here import PCBs for their smartphones and assemble the devices here.