The consumer electronics industry is quite taken aback at the Union Budget 2018-19 announced by the Finance Minister on February 1, 2018, and the impact it will have on business.
The budget has proposed changes in customs duty rates. The customs duty for LCD/LED/OLED panels and other parts of LCD/LED/OLED TVs has been increased from 7.5/10 percent to 15 percent. Also, from nil duty on 12 specified parts for manufacture of LCD/LED TV panels, a 10 percent duty has been imposed. Customs duty on mobile phones has been increased from 15 percent to 20 percent, and on some of their parts and accessories to 15 percent. An additional 7 percent has been levied on the aggregate customs duties, once the imposition of the 10 percent Social Welfare Surcharge and abolition of the 3 percent education cess is taken into consideration.
Effectively, the CKD televisions attract 20 percent, the finished panels 15 percent, and the open cell LED TV panels 10 percent customs duty. And finished panels are not yet manufactured in the country. Volcan Investments, the parent company of Sterlite Technologies had announced plans to commence work on this in 2018.
These changes are absolutely against the government’s phased manufacturing program and Make in India initiative. The manufacturers at their end (while hoping for a re-consideration by the government) are each reviewing their respective strategy and trying to chart out a sensible roadmap.
As an immediate impact, they are considering increasing prices of television sets by 5–6 percent. They may have to scale down the local assembly operations of LED TV panels. Finished LED TV panels could perhaps now be sourced from countries with whom India has signed free trade agreements, giving a 7–8 percent cost benefit, of course they would have had to be manufactured in the same country, and have the requisite value addition.
In an already challenging scenario, while the industry was grappling with a 28 percent GST and a decline in demand over the last 4 months, the Union Budget has created quite a stir for this promising industry.