All those planning to buy a new smartphone this year should be prepared to pay a little more as the government in its Union Budget 2013 announced a hike of 6 percent in the excise duty on the handsets priced more than Rs. 2,000. With the proposed raise in duty, the handset costs would increase from Rs. 120 to Rs. 3,000, depending on the price of the smartphone. Earlier, the government levied only 1 percent of excise duty on the handsets.
While presenting the Union Budget 2013, Finance Minister P Chidambaram said, “I do not propose to change that in the case of low-priced mobile phones. However, on mobile phones priced at more than Rs 2,000, I propose to raise the duty to six per cent.”
“70 per cent of imported mobile phones and about 60 per cent of domestically manufactured phones are priced at Rs 2,000 or below.”
The proposed hike, as expected, has met with harsh criticism from the mobile phone industry. Analysts believe the move is likely to have a huge impact on the industry as well as customers.
Business Today in its report quotes S.N. Rai, Co-founder and Director, LAVA International Ltd as saying, “The excise duty proposed in the union budget on mobile phones priced Rs 2,000 and above would have a very high impact on the industry.”
“The industry is already suffering from non uniform VAT issues and the increase in excise duty further escalates prices. Also, this step is a discouraging move for the domestic industry, which is looking at making India a manufacturing base for mobile phones.”
Asim Warsi, VP -Samsung Mobile, also believes the move will have a negative impact. “We do not see the Budget reviving the consumer sentiments in the absence of any specific incentives. Further, the increase in the excise duty on mobile phones will have a negative impact on the mobile industry and should lead to an increase in prices for end consumers,” Warsi is quoted as saying.
It is believed the price hike may lead to increased sales of unbranded handsets in the grey market. “…we would request the rollback of the increase on mobile phones beyond Rs 2000, as mobile phones are the primary mode of access to information and services; a tool for learning, development and income generation for the youth and non urban consumers,” says Balaji, VP & MD, Nokia India.
Smartphones are getting popular in the country with a lot of users switching from the traditional feature phones to high-end devices. Moreover, smartphones are now available in each possible budget category, starting from Rs. 5,000 to Rs. 50,000+.
According to a recent Neilsen survey, the country currently has 900 million mobile phones in use, out of which 40 million are smartphones.
Budget 2013: Smartphones to get costlier; draws criticism from industry
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