Domestic manufacturing of electronics have grown exponentially, and India is now even exporting mobile phones and chargers to other markets, said Finance Minister Nirmala Sitharaman at her Union Budget 2021 speech earlier today. In conjunction, Sitharaman announced that as the government targets greater “domestic value addition”, “some parts” of the mobile manufacturing process will be imposed with a 2.5 percent duty going forward, instead of the fully exempted taxation in this sector so far.
As part of the new tax regime, exempted parts and sub-parts required for mobile manufacturing including the circuit boards, camera components and connectors will now face 2.5 percent customs duties, while the circuit boards and the plastic mouldings for chargers and mobile phone adapters will see an increase in duty from 10 percent to 15 percent. Other mobile adapter components, which were fully exempted, also face a 10 percent duty now. Parts for making Lithium ion batteries, which are key to powering the mobile devices, have also been slapped with the same 2.5 percent duty now. The revised customs rates also apply for the electronics appliances sector, which now include refrigerator and air conditioner compressors, as well as insulated cables of a certain grade. LED lights now face 10 percent customs duties instead of 5 percent, and solar lamps and inverters, which had 5 percent duties, now face 15 and 20 percent, each.
The government of India has, of late, pushed for bringing larger volumes of local manufacturing to India. Major manufacturing companies such as Foxconn, Pegatron and Wistron have all set up shop in various scales in India, buoyed by the local manufacturing schemes offered by the central government. In 2020, the union government of India announced production-linked incentive (PLI) schemes to urge smartphone brands and manufacturers to make more devices in India. While the tax exemptions may have contributed to the initial reaction to the industry, it remains to be seen how the industry reacts to the new tax rate that the government has dictated as part of Union Budget 2021.
Union Budget 2021: Other technology announcements
The Union Budget 2021 speech by Sitharaman also confirmed that the upcoming 2021 national census of India will become the first in the history of our nation to be held digitally. The process will reportedly use a mobile app to make the census process paperless. In other sectors related to technology, FM Sitharaman also announced a capital gains tax exemption for investment in Indian startups by one further year, and the exemption is now being extended for startup investors until March 31, 2022. Sitharaman also announced the use of “deep analytics” and “artificial intelligence” by the central Income Tax department in order to identify tax evaders and fraudsters, and claimed that the results of using new technologies in governance has been immediate and resounding.