Sales of High-End Smartphones In Grey Market in India Causing A Loss Of Rs 2,500 Cr. Every Year!

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The sales of high-end mobile phones in the grey market have been causing an estimated loss of Rs. 2500 crore each year, as claimed by India Cellular & Electronics Association (ICEA). At present, a basic customs duty of 20% has been imposed on the imported handsets.

It has been suggested by the industry body to impose a maximum custom duty of INR 4,000 on handsets costing above INR 20,000 for terminating the illegal sale and discouraging the duty invasion.

Mohindroo further said that the industry body has requested the finance minister, Nirmala Sitharaman, to apply a BCD (basic customs duty) of INR 4,000.  

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As reasoned by the ICEA, applying this step will wipe out the higher margins in the illegal sale of the highest costing handsets, along with giving a boost to the legal imports.

“ Revenue impact on this would be an additional duty of Rs 700 crore of BCD approximately, which will get netted off because of the reduction in duty on the legal import. Hence, there will be no net gain or a net loss. The GST collection will, however, go up over by INR 1,000 crore & the market environment will turn out to be much regular and cleaner.” Mohindroo said.

The ICEA said that the recent budget was primarily focused on increasing the electronic manufacturing in the country along with a provision of writing off the under the Income Tax Act, as stated by the Deccan Herald.

The ICEA has requested the government to bring down the GST on the parts of mobile phones to 12% from 18% at present, as the rate is creating a transposed duty structure in the sector.

The GST on mobile phones as of together is 12%, however, 8% is applicable on accessories/parts such as the back cover, headphones, batteries, etc.

The statement by Mohindroo regarding the issue was that the inverted duty structure has badly impacted the cash flow, which is turning into a big problem for the manufactures and it is also badly impacting the competitiveness of the local market of mobile phones.

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Despite the exploded adoption, the smartphone penetration in India is hovering around 54%. This makes India the most favourite market for all the device manufacturers considering other large markets, US and Chins, are either stagnated or saturated.

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