The Union Finance Ministry has announced an increase in Basic Customs Duty (BCD) to 20% on flat panel displays, as part of its broader strategy to strengthen domestic electronics manufacturing and correct the inverted duty structure in the sector.
At the same time, the government has reduced the BCD on open cells and key components to 5%, while fully exempting certain parts used in the manufacture of open cells for LCD and LED televisions.
Policy Aligned With ‘Make in India’ Objectives
Explaining the rationale behind the move, the finance minister said the changes are aligned with the ‘Make in India’ initiative and are intended to encourage value addition within the country.
The BCD on Interactive Flat Panel Displays (IFPDs) has been raised from 10% to 20%, while duties on open cells and other critical components have been lowered to improve cost competitiveness for domestic manufacturers.
Further Incentives for Open Cell Manufacturing
To further boost local manufacturing of open cells used in LCD and LED TVs, the Finance Ministry has announced a complete exemption from customs duty on parts of open cells.
In the 2023-24 Union Budget, the BCD on parts of open cells had already been reduced from 5% to 2.5%. The latest exemption builds on that step, signalling the government’s intent to promote deeper localisation of display manufacturing.
Correcting the Inverted Duty Structure
Industry observers note that the revised duty structure addresses a long-standing issue where finished electronic products attracted lower duties than key components, discouraging domestic assembly and manufacturing.
By raising duties on finished flat panel displays while lowering or eliminating duties on inputs, the policy aims to make local manufacturing economically viable and attract new investments into the display ecosystem.
Expected Impact on Industry and Prices
In the short term, the higher customs duty may lead to price increases for imported high-end display panels. However, the government expects the long-term benefits to outweigh these effects as manufacturers shift toward local sourcing and production.
Domestic manufacturers and global original equipment manufacturers (OEMs) are now incentivised to localise supply chains to avoid the higher duty on imported finished goods.
Following the Smartphone Manufacturing Playbook
The policy mirrors the approach adopted in the smartphone sector, where phased manufacturing programmes helped India emerge as the world’s second-largest mobile phone producer.
By applying a similar strategy to display panels and electronic components, the government aims to build a self-sustaining electronics manufacturing ecosystem that can meet domestic demand and support exports.
Building India’s Display Manufacturing Ecosystem
Over time, the move is expected to:
- Encourage investment in display manufacturing facilities
- Reduce reliance on imported finished panels
- Strengthen India’s position as a competitive exporter of high-tech electronics
The Finance Ministry said the measures are part of a long-term plan to position India as a global hub for electronics manufacturing, spanning both components and finished products.
Source: The Tribune