Consumers to feel the pinch

Soon prices of a number of commonly used consumer goods will rise sharply with the government raising customs duty five to 10 per cent on mobile phones, television sets, imported perfumes, shoes, watches, toys, video game consoles and edible oil. The move, intended to encourage local manufacturing, is the second after a similar increase in December 2017.

Among handset makers, these measures may jeopardise Apple’s plans for India. According to Tarun Pathak, associate director, Counterpoint Research, while, other major brands from India and China are already manufacturing locally, Apple imports 90 per cent of its flagship iPhone devices from China and elsewhere. “Apple will be impacted the most. Other players, who are still importing a percentage of devices have the window to quickly shift to local assembly, unlike Apple”, he said. The only Apple model that it currently sourced locally is iPhone SE, launched in early 2016.

Others like Samsung, Xiaomi, Vivo, Oppo and Lenovo (including Moto) are already manufacturing and/or sourcing locally. However, duty increases on components like chargers and printed circuit board assembly will impact all brands.

Following the mid-December hike, Apple had to effect an average price rise of 3.5 per cent across its iPhone portfolio. Analysts say, further rise in import duty will hamper its already strained pricing strategy.

Prices of TV sets, too, are expected to rise three to five per cent, with marketers reeling under higher raw material costs and a 7.5 per cent duty hike in December. A doubling of customs duty on flat TV panels to 15 per cent and other parts that together form 70 per cent of cost will impact all brands. Japanese major Sony may be hit the most as it does not have a manufacturing unit here, others like Samsung, LG, Panasonic said they are studying the impact.

The 3 million wearables market will see prices rise six to eight per cent as firms import most devices. Steep hikes in olive and saffola oil prices are also imminent, said a senior executive from a top player.

LG, Panasonic, ZTE, Akai, HP and Videocon have, however, welcomed the move saying it will boast local manufacturing in long-term.

“The increase in customs duty for perfumes, toiletries, sunglasses, and footwear by almost 10 per cent will have a significant impact on prices, directly driving inflation and impacting consumption,” said Govind Shrikhande, managing director, Shoppers Stop.

Jaitley also annnounced a social welfare surcharge of 10% on aggregate customs duties on imported goods

cess, and secondary and higher education cess on imported goods at 2 per cent and 1 per cent, respectively, which the government abolished.

The government cut excise duty on petrol and diesel by ~2. It abolished road cess of ~6 and instead created a new cess of ~8 called “road and infra cess”. This essentially means that there will be no net impact on the consumer.

Jaitley also announced a change in the name of Central Board of Excise and Customs (CBEC) to Central Board of Indirect Taxes and Customs (CBIC).