GST – Impact on mobile handset manufacturing and import

With a vision to increase the share of manufacturing in the country’s GDP from 16% to 25% by 2022, the Indian Government has launched various incentive schemes and introduced a duty differential structure for certain industries, mobile handset industry being one of them. However, the Government intends to have minimum exemptions under GST to facilitate seamless flows of credit. This could negatively impact the mobile handsets industry as it gets incentives and duty differential in the current taxation system.

Continuation of the incentives, given to mobile manufacturers, in GST is important for maintaining the growth and momentum in the mobile manufacturing industry. In this regards, Government in various press releases has shown that appropriate measures will be taken to continue the incentives of the manufacturers in GST.

Current duty structure in India

Particulars Import of mobile handsets Import of raw materials for domestic manufacturing
Imports Customs-13.5% on 65% of MRP (BCD Nil; CVD 12.5%; NCCD 1%) Customs: Nil (for components)

Customs: 12.5% (BCD Nil, CVD 12.5%, SAD nil) for chargers batteries and headsets

Domestic manufacturing NA Excise duty – 2% on 65% of MRP(without credit of capital goods and inputs)

Excise duty – 13.5% on 65% of MRP (with credit of capital goods and inputs)

Sale (Local) VAT – 5% to 14.5%

CST 2%


Currently a manufacturer of mobile handsets gets a benefit of 8-10% in the form of differential duty as compared to an importer of mobile handsets.

In view of this, a separate mechanism for incentivizing mobile handset manufacturers can be recommended wherein the manufacturers can be granted relief/incentive by way of refund/ rebate, keeping it equivalent or more than the incentives available under the current regime.

Further, we can expect similar incentives to extend for components manufacturers. This would encourage manufacturers to increase local value addition in India and thus increase employability.

As per a study conducted, the value addition in manufacturing of mobile handsets in India has been mentioned as approximately 6% which can be increased to upto 32% by 2020. The incentive percentage under GST could depend upon the % of value addition of manufacturing in India to promote domestic manufacturing.

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