Finance Minister P. Chidambaram announced a hike in excise duty to six per cent on
mobile phones costing Rs 2,000 and above in his Budget 2013/14 speech.
The five percentage point increase in excise duty from last year's one per cent to six per cent will make mobile phones costlier.
"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," says S.N. Rai, Co-founder and Director, LAVA International Ltd. "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."
This is likely to impact entry-level to mid-level phones as a major part of the
sales are recorded from this segment . "The benefits announced for key sectors such as infrastructure, agriculture and education are bound to positively impact the economy. This year's budget initiatives focusing on women and youth also resonate well," says Asim Warsi, VP, Samsung Mobile says. "The 15 per cent investment allowance on manufacturing investment should give a fillip to domestic manufacturing." However, in overall terms, Warsi believes the budget may not revive consumer sentiment in the absence of any specific incentives to boost it. "Further, the increase in excise duty on mobile phones will not have a positive impact on the mobile industry and should lead to an increase in prices for end consumers."
While no one is happy about the increase in excise duty, Nokia wants the finance minister to roll back the excise hike. "The government's decision to keep concessional excise duty of one per cent intact on mobile phones in the sub Rs 2,000 category is welcome. However, we would request the finance minister to roll back excise duty increase on mobile phones beyond Rs 2,000, 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 P. Balaji, Vice President and Managing Director, Nokia India. "The hike is likely to increase sale of grey, unbranded sub-standard handsets, which is not good for the consumer, industry and exchequer."
While most of the companies are not happy about the rise in excise duty and likely to increase phone prices, there are chances that the price of Apple's iPhone 4, 4S and 5 devices will remain unchanged. Apple Inc. always considers many such factors and the dollar fluctuation while deciding the price of the iPhone in every market. So, the iPhone price may remain unchanged.
"I am disappointed about the decision of hiking the excise duty on mobiles. This was the time when smartphones should have been encouraged. The proposed rise in excise duty will only encourage the grey market to grow further," says Pankaj Mohindroo, Founder and National President, Indian Cellular Association.
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