India based smartphone manufacturers such as Micromax, Karbonn, Lava and Intex are to increase the cost of their offerings as a result of Union Budget 2015. The budget has increased the duty on the important handsets. However, the top executives of these firms are expecting the measures that were announced by the Finance Minister to spur the domestic manufacturing of their smartphones.
Despite being based inIndia, these firms import a majority of their smartphones that go on sale in the country. The budget proposal by Arun Jaitley claimed that there will be an hike in the excise duty on mobile phones from 6 percent to a whopping 12.5 percent, provided the vendor takes the credit for the central value added tax. On the other hand, if there is no Cenvat credit, the excise duty will be unchanged at 1 percent.
The Cenvat credit is derived from the duty paid during the importing of the handsets. As a result, the duty different between the imported and the locally made handsets have widened by about 11.5 percent. This change in the tax structure is focused to urge local manufacturing in the country.
Regarding this, a Micromax spokesperson claimed that there will be a short term impact on the pricing of the devices due to the rise in the duties. Eventually, Lava and Intex will be increasing the cost of their smartphones by 5 percent and Karbonn has announced a 6 percent increase. Notably, Samsung will not be hiking the price of its offerings as it manufactures 90 percent of its devices including smartphones in the country.
Regarding this move, Hyun Chil Hong, President and Chief Executive of Samsung India Electronics claimed that this new tax structure motivates the Make inIndiainitiative to the next level.
As per analysts, the increase in tax by 4 to 5 percent will be passed onto the consumers. Notably, the Indian manufacturers including Micromax, Karbonn, Lava and Intex has sold around 64.3 million devices that were imported toIndia. The local vendors have been in the process of shifting their manufacturing toIndiagradually as their current sources are inChinaandVietnam.