Import Duty Current Affairs

Government levies 10% import duty on key smartphone components

The Central Bureau of Excise and Customs (CBEC) under Finance Ministry has imposed a 10% duty on imports of key smartphone components such as populated printed circuit boards (PCBs), camera modules and connectors. At present there is zero import duty imposed on the three components.

Significance

This move will make imports of components expensive while giving stimulus to local manufacturing under Make in India program. Such input parts for making these components locally, will not attract any import duties. But it will lead to increase in prices of mobile phones for those companies that do not make or source these components locally. PCBs make up about 50% of cost of making smart phone. This decision will push local assembly or manufacturing of these components as companies who make here will get a price advantage over those who don’t.

Background

This decision follows the government’s announcement to impose 20% basic customs duty (BCD) on fully built mobile phones, which came into effect from February 1, 2018 as part of its phased manufacturing program (PMP). Since 2014, import duties have acted as catalyst to grow investment into mobile phone manufacturing in India, with number of factories increasing to 120 from handful. International contract manufacturing companies like Foxconn, Flex, Wistron and handset makers from China, India besides South Korea’s Samsung have taken local production of mobile phones to 225 million in 2017, which his more than 80% of the phones sold in country.

Phased Manufacturing Programme (PMP)

Government had PMP in May 2017 for promoting the growth of domestic manufacturing of Cellular mobile handsets. This programme is under Ministry of Electronics and Information Technology (MieTY). Its overall aim is to impose duties (differential duty regime) and give tax reliefs and incentives on select products involved in domestic manufacturing of cellular handsets. It is called phased manufacturing programme because it will give fiscal benefits to domestic manufacturing of various components of cellular handsets in different fiscals.

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Government doubles import duty on wheat to 20%

The Central Board of Excise and Customs (CBEC) under Union Finance Ministry has doubled import duty on wheat to 20% from 10% to curb cheap shipments and give positive price signal to farmers in ongoing Rabi season. It also imposed import duty of 50% on peas to check cheaper shipments from countries like Canada to boost domestic prices. The import duty on peas has been imposed to curb shipments and boost domestic prices.

Purpose

In the last two years India, world’s second biggest wheat producer has been importing wheat after local production fell due to successive droughts. India had imported 5.75 million tonnes of wheat in 2016/17 fiscal year ended on March. Doubling of import duty aims to give positive price signal and encourage farmers to grow wheat in more area as farmers have started planting of rabi (winter) wheat crop. Moreover, Government does not want wheat growers to follow way of pulses farmers who shifted to other crops this kharif season as prices remained low just before sowing period owing to bumper crop last year.

Pulses Issues

India produced record 22 million tonnes of pulses in 2016-17 crop year which led to fall in domestic prices, even below MSP. Moreover, country also imported about 5 million tonnes of pulses last fiscal.

Import Duty

It is a tax collected on imports and some exports by customs authorities of country. It is usually based on value of goods that are imported. Depending on context, import duty may also be referred to as tariff, import tax, customs duty and import tariff.

The purpose of import duty is to raise income for local government and to give market advantage to locally grown or produced goods that are not subject to import duties. It is sometimes used as tool to penalize a particular nation by charging high import duties on its products.

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