Electronics manufacturers have pitched for a broad set of customs duty changes in the Union Budget, maintaining that rationalising tariffs on components and capital equipment is critical to sustaining the country’s mobile phone and electronics manufacturing momentum. The proposals, submitted by industry body ICEA, are aimed at reducing cost disadvantages faced by domestic units and improving competitiveness as global companies expand supply chains beyond China.
For companies such as Apple’s contract manufacturers, Samsung, Dixon Technologies, Tata Electronics and Reliance-backed electronics ventures, the recommendations, if accepted, could lower input costs, improve margins and accelerate localisation of components that are still largely imported.
Lowering Sub-assembly Duties
A key demand is the reduction of import duties on several mobile phone sub-assemblies such as microphones, receivers, speakers and printed circuit board assemblies. While these parts account for a small share of a phone’s bill of materials, industry executives said that higher duties at the component level raise overall production costs and weaken cost advantage against rivals such as Vietnam. ICEA has sought a reduction in duty on these components to 10%, aligning them with other sub-assemblies already taxed at that level.
For companies like Apple and Samsung, which rely on large-scale assembly operations in India, such changes could improve export competitiveness, particularly as smartphone exports have become a major driver of electronics shipments. Apple’s India operations, led by Foxconn and Tata Electronics, are especially sensitive to input costs given the scale at which iPhones are now being exported from the country.
Correcting Inverted Duties
Another major proposal relates to correcting what the industry calls an inverted duty structure. In several cases, parts and inputs attract higher duties than finished products, discouraging local manufacturing. This is particularly relevant for display assemblies, wireless charging components and capital equipment used in phone and electronics factories. Industry estimates suggest that such anomalies raise costs and make it more economical to import finished goods rather than manufacture them locally.
For manufacturers like Dixon and Tata Electronics, which are expanding into backward integration and component manufacturing, this issue is critical. The industry has sought zero-duty imports for inputs used in display assemblies and wireless charging modules, while retaining moderate duties on finished products. The aim is to make domestic assembly financially viable and encourage investment in component ecosystems.
Capital Equipment Exemptions
The proposals also address capital equipment, an area that affects nearly all large electronics players. While finished machinery can be imported duty-free, parts required to make such machines domestically attract duties of up to 20%. This discourages local manufacturing of equipment and increases dependence on imports, particularly from China. The industry has urged the government to extend duty exemptions to components used in capital goods manufacturing, a move that could benefit firms setting up large-scale facilities for mobile phones, semiconductors and lithium-ion batteries.
For companies such as Tata Group and Reliance, which have announced ambitious plans in electronics, batteries and components, these changes could significantly reduce project costs and improve returns on investment. The proposals also gain urgency amid tightening global supply chains and China’s export controls on certain equipment.
Improving Bonded Schemes
The industry has also flagged operational issues under the bonded manufacturing scheme, or MOOWR, which many electronics exporters use. These include the lack of depreciation benefits on capital goods, procedural delays during movement of goods, and exclusion from export incentive schemes such as RoDTEP. Addressing these, manufacturers say, would improve cash flows and make plants more competitive globally.
Another demand with direct implications for manufacturers is the call to standardise customs classification for products such as display panels and electronic components. Inconsistent classification across ports has led to disputes, delays and higher compliance costs, particularly for companies operating at scale.