Govt may defer levying import duty on display assembly for a year

New Delhi: The government is considering deferring the levy of import duty on display assembly till October 2021, a move when approved will provide a major relief to mobile phone makers.

Official sources say the ministry of electronics and information technology (MeitY) is believed to have proposed the deferral and the matter is now with the department of revenue (DoR) in the finance ministry.

According to the fourth phase of manufacturing plan 2017, 10% basic customs duty on display assembly, touch panel, cover glass assembly and vibrator motor/ringer was scheduled to be imposed from April 1, 2020. Except for vibrator motor/ringer, the other three schedules were postponed for October 2020, which is now likely to be extended further by a year. The three components constitute 20% of a device’s bill of materials and a levy of the import duty could have led to higher cost of production, squeezing margins, which may have forced brands to increase device prices.

“Meity, we understand, has supported our request for deferring the levy of import duty on display assembly till October 2021 and we are confident about DoR’s nod as well in a week or so,” Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA), told ET.

The body represents major global handset brands including Xiaomi, Apple, Motorola, Nokia, Oppo, Vivo, Realme, besides contract manufacturers Foxconn, Wistron, Dixon and Indian brands Lava, Micromax, Karbonn.

Mohindroo said that Samsung, which is not a member of the ICEA, is also supportive of deferral of duties. The Korean giant’s Indian subsidiary, Samsung Display, which invested in a Greater Noida plant last year, will need at least a year more to start production, as per industry information.

Samsung didn’t reply to ET’s emailed queries.

The ICEA, in its letter to the finance ministry dated September 4, had said that the process of display assembly localisation has not even started in India due to tepid progress made by vendors who have committed investment in India.

As per ICEA, display assembly vendors including Holitech, TXD, LCE and CSOT, who have started operations in India, claim that they will be able to produce 13.90 million display units per month for smartphones and 11.4 million units for featurephones by this October.

“Claimed capacity is inadequate and will only be able to cater to marginal demand of the market as the discussion between vendors and OEMs/brands have not even started,” ICEA said in the letter.

The process of discussing specifications and quality checks of handset displays between brand and the vendor and placing of order requires at least eight months.

“OEMs (original equipment makers) believe that vendors are not in a position to supply the display assembly even though they are making tall claims. They may be working on the premise that OEMs will be forced to source the display assembly from them due to price arbitrage that will be available after imposition of 10% BCD,” the letter said.

Mohindroo told ET that the industry is building the display ecosystem from scratch where the focus is not on assembly but to bring complete fabrication manufacturing facilities in India within two years.

Govt may defer levying import duty on display assembly for a year Govt may defer levying import duty on display assembly for a year Reviewed by TechCO on 9/16/2020 Rating: 5

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