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Clamour for duty cut on mobile components

Calcutta, Oct. 4: The Indian Cellular Association (ICA) has expressed concern over the grey menace in the mobile component and accessories industry.

In a memorandum to Rajeev Ratan Shah, Union IT secretary, the organisation has suggested reduction of custom duties and 12 per cent sales tax applicable throughout the country.

“The market for components, accessories and parts of mobile handsets is now taking off in a big way. Most of the mobile handsets sold in India in the earlier stages now require some kind of repairs or replacements. Besides continuous research being conducted the world over, the companies are making available various accessories and parts that add value to the use of mobile handsets,” explains Pankaj Mohindroo, president of ICA.

The organisation has made an in-depth study of the estimated market for these products in India.

“From a mere Rs 2200 million in 2002, the market is likely to be over Rs 42500 million in 2007. As in the case of mobile handsets initially, the legal market for accessories and components is just 2 per cent, that too for cheaper products. If the trend continues, only a mere 5 per cent of the market will be legal by 2007,” warns Mohindroo.

ICA has suggested that the customs duty on accessories and components must be aligned with the customs duty on mobile handsets. A rationalisation of the customs duty to the basic 10 per cent would help the legal market grow to 30 per cent during the year and up to 70 per cent till 2007.

The organisation has also pointed out that reduction of duties on the four items —batteries, charger/adapter, car chargers and handsfree kits —that contribute to a major portion of the market, would be a step forward in wiping out the grey menace.

Legal players are unable to have a grip over this lucrative segment mainly due to two-fold reasons.

There are more than 30 kinds of accessories, components and parts that are replaced at regular intervals for use with mobile handsets. As against an effective duty of 14.4 per cent including SAD on mobile handsets, the effective customs duty, including SAD and CVD, on such accessories and components is between 35 to 50 per cent.

The high customs duty coupled with sales tax of over 12 per cent has resulted in a thriving grey market.

“Operators in the grey market continue to import poor quality imitated accessories and parts and sell the same locally without payment of any customs duties and sales tax,” rues Mohindroo.

ICA has been in constant negotiation with the government to introduce measures that would help counter the grey market.

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