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Basic customs duty (BCD) on import of select electronic items, such as mobile handsets, television sets, and ancillary components, may be lifted after some time, as the duty is meant only as a temporary protection for local producers in the early stages of their capacity building.

The government is looking at the feasibility of introducing end dates for the higher import tariff on these items, said a government official, seeking anonymity. The goal is to incentivise investments in local production of electronic items, but tariff protection will not be a permanent feature. Introducing end dates for the tariff measures meant for improving local value addition will also signal to the world India’s credentials as an open economy.

“There is a thinking in this direction but nothing more can be said at this stage," he said. In the 2018-19 Union budget, BCD on mobile handsets was raised from 15% to 20%. In December 2017, 20% customs duty was also introduced for television imports. Many components for mobile handsets also attract 15-20% BCD and 5% duty is imposed from 1 October on imports of open cells used in television sets.

Under the phased manufacturing programme to promote indigenous production of mobile handsets, starting from the FY16 budget, the Centre gradually hiked customs duty on mobile phone handsets and components, including chargers, batteries, microphones, receivers, key pads, USB cables, printed circuit board assemblies, and camera modules. Effective 1 October, the government also imposed 10% customs duty on display assemblies and touch panels of handsets.

BCD is the extra tax that is applicable on imports, over and above all other indirect taxes that are levied on imports and locally-produced items, and represents the level of tariff protection that is available to local producers.

Along with duty protection, local producers are also eligible for benefits such as duty-free import of certain capital goods. The government has a goal of scaling up the domestic electronics industry from $59 billion in FY18 to $400 billion by 2025.

Experts said the policy focus is on making the country self-reliant. This entails supporting identified manufacturing sectors in their effort to move up the global value chain with both fiscal and non-fiscal measures. “Any further measures, tax or otherwise, may be considered taking into consideration the overall sectoral or product requirements and the support the ecosystem needs for consolidating and aligning them with other bilateral or multilateral commitments and the overall trade strategy," said Rahul Shukla, executive director, PwC India. The hike in customs duty on mobile phones and components has led to many countries, including the US, the EU, and China, dragging India to the dispute settlement mechanism of the World Trade Organization.

India, which is a signatory to the 1996 Information Technology Agreement (ITA), is required to eliminate tariffs on a range of products, including mobile handsets. The US and others have complained that imposition of tariffs on information technology products by India are against the principles agreed under ITA.

Asit Ranjan Mishra contributed to this story

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