Apple Could Be Hurt By India's Import Tax Rate Hike

In a bid to build up the domestic industry, the Indian government increased the import tax Dec. 14 on dozens of electronic products like mobile phones and television sets.

The rise in tax from 10 percent to 15 percent for foreign smartphones is of particular significance considering the country’s $10 billion smartphone market.

The same increase was applied to video cameras, while television sets were double to 20 percent.

India overtook the U.S. in the third quarter of this year to become the second largest smartphone market in the world and definitely cannot be ignored by big players in the industry.

While Samsung has seemingly got on-board with Prime Minister Narendra Modi’s flagship “Make-in-India” program, Apple hasn’t particularly done so.

Samsung Electronics assembles most of its handsets it sells to the country in India.

China-based manufacturers too tend to have assembly lines in India.

The recent rise in import tax is thought to hurt Apple who apart from the iPhone SE — that is assembled in India — imports all other models into the country.

According to 9to5Mac, nine out of 10 phones by the company are imported. This builds on the fact that Apple has already sought a range of unlikely incentives and tax relief from the government for it to expand its manufacturing in India.

The Indian government has already acceded to some of Apple’s demands and removed restrictions on the import of smartphone parts.

According to data from Counterpoint Research, eight of 10 phones sold in India are produced locally. Commenting on the Indian government’s new tax impositions, Tarun Pathak, an associate director at Counterpoint Research, said: “It will impact Apple the most as the company imports 88 percent of its devices into India. Either this will lead to increase in iPhone prices or force Apple to start assembling more in India.”

On Saturday, an Apple official told Indo-Asian News Service (IANS), "there is no comment on this as it's a statutory industry-wise duty hike."

Apple assembles its iPhone SE model with its Taiwanese manufacturing partner, Wistron Corporation, in Bangalore, India.

In its recent earnings call, Apple announced that revenue in the country doubled year-on-year.

President of the Indian Cellular Association, Pankaj Mohindroo, said Friday, the recent tax hike will boost manufacturers making over 500 million phones a year in the country.

On Monday, the country’s Finance Minister, Arun Jaitley met with a delegation of Indian telecoms equipment manufacturers seeking government help to promote the domestic industry while he prepares the budget for 2018/19.

Imports are a huge concern for the country’s policymakers given that goods imports in the seven months ending October rose 22 percent to $256.4 billion from a year earlier.

Over 75 percent of smartphones sold in India cost less than $250.