Atmanirbhar proves costly for electronics goods sector with tariff hikes

The push for Atmanirbhar Bharat has taken a costly twist for the electronics goods sector because of its heavy dependence on China, and the fresh set of tariff hikes in the Budget. The hike is meant to motivate manufacturers to make products in India.

The Finance Minister Nirmala Sitharaman, in the Budget 2021-22 announcement, had said India’s customs policy should have the twin objective of promoting domestic manufacturing and helping India get onto the global value chain and export better.

The government raised duties, which came into effect on Feb. 2, on about 1,250 of the 10,400-odd items on India’s customs list. Key electronic components like printed circuit board assembly, camera module and connectors will attract 2.5 per cent duty. In the automobile sector, customs duty rates for items like safety glasses, parts of the signalling equipment, brakes and ignition wire sets have been raised to 15 per cent from 10 per cent.

Analysts believe the steeper import duty rates are a precursor to schemes under the production-linked incentive (PLI) plan. Bipin Sapra, tax partner at EY India, had said these hikes are part of the broader plan to push local production of electronics and auto components. Mahesh Jaising, National Leader & Indirect Tax Partner Deloitte India, had said that the customs changes are in line with what was expected in two key focus areas – ease of doing business by reiteration of the streamlining of customs processes, and Make in India by way of the increase in duties on products, components to boost manufacturing in India.

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Industry stakeholders and experts said some revisions are aimed at boosting the government’s localization of production plan, while others have been introduced to protect local producers and manufacturers against cheaper imports from countries like China.

The Indian Cellular and Electronics Association, in a letter to the Ministry of Electronics and Information Technology, described the recent set of hikes as a “big setback”.