To push ‘Make in India’ campaign, the India government saw a massive opportunity in the smartphone market, which has been growing at a double-digit rate in India.
In the budget 2018-19, the government hiked customs duty on mobile phones to 20 per cent from 15 per cent, besides imposing a 10 per cent duty on import of key smartphone components like camera module and the printed circuit board, with a view to boosting domestic manufacturing.
However, the entire effort of the government to help domestic manufacturing can be scuttled with one move—with a shift in import volume.
The Indian government is in free-trade agreements with ASEAN countries such as Malaysia, Singapore, Vietnam, Indonesia and Thailand, among others. It means that items imported from the countries don’t levy any duty on Indian soil.
The trade agreement, however, opens opportunities for phone makers from China to ship handsets into India via these routes.
The Indian Cellular Association seems to have sensed something fishy and has alerted the revenue department about the likelihood of fully built mobile phones being shipped in at zero duty from ASEAN countries.
Additionally, it also sought an immediate investigation into such moves, which it said could cause revenue loss to the government and is a threat to the ‘Make in India’ plan.
The association has written to revenue secretary Hasmukh Adhia and informed him about the possibility of a substantial case of customs duty evasion in the case of import of CBU (Completely Built Unit) of mobile phones from ASEAN countries, especially Vietnam, Indonesia, and Thailand, at zero import cost.
The Indian Cellular Association president Pankaj Mohindroo said that the handsets which are imported from ASEAN are not made in those countries. He asserted that 65 per cent of components used in the handsets are from China and mere assembly of phones in an ASEAN country and import from there did not qualify for duty exemption.
In his views, the matter requires thorough independent investigation.
“The duty evasion under the FTA (free-trade agreement) means a revenue loss of 20 per cent on this item. Further, the evasion means that the development of Indian industry is severely compromised,” the association said.
In the past few years, the Chinese phone market in India has grown enormously. According to International Data Corporation, Xiaomi is the second largest smartphone brand in India followed by Lenovo, Vivo and Oppo.
These companies also have various manufacturing units in the country.
The development was first reported by ET.