New Customs Duty Waives on Electronic Components
| General Studies Paper III: Industrial Policy, Growth and Development |
Why in News?
Recently, the Government of India waived Basic Customs Duty (BCD) on key inputs for display assemblies, lithium-ion cells, and inductor coil modules.
Key Changes in New Customs Duty Waiver
- Notification: The Department of Revenue, Ministry of Finance, issued three separate Customs notifications on 8 July 2026.
- It granted Basic Customs Duty (BCD) exemption on specified goods used in manufacturing selected electronic components.
- The notifications amend existing customs exemption schedules under the Customs Act, 1962.
- Nature: The order provides 100% exemption from Basic Customs Duty (BCD) only on specified inputs, machinery and goods notified for manufacturing designated electronic components.
- The exemption does not apply universally to all electronic imports.
- They do not announce blanket exemption from IGST, Social Welfare Surcharge, or other applicable levies unless separately provided under customs law.
- Components: Duty exemption covers notified goods used for manufacturing display assemblies, including components required for display cells, backlight units, flexible printed circuit assemblies (FPCAs) and other specified display-module parts listed in the notifications.
- The notification expands the exempt list for lithium-ion cell manufacturing by covering specialised machinery such as powder dryers, slurry systems, coating machines, vacuum pumps, winding, stacking, cutting, testing and automated packing equipment.
- Specified goods used in manufacturing inductor coil modules are also granted BCD exemption through a separate notification issued simultaneously by the Ministry of Finance.
- The notified list additionally includes components used in wireless charging systems, such as NFC coils and specified NdFeB magnets, wherever covered under the exemption schedule.
- Validity Period: The customs exemption has been notified to remain effective until 31 March 2029, unless modified or withdrawn through subsequent government notification.
Policy Rationale Behind this Reform
- Strengthening Domestic Electronics Manufacturing: The Government introduced the BCD exemption to support domestic manufacturing of such components. The reform forms part of India’s broader manufacturing policy framework.
- Supporting Make in India Initiative: The reform aligns with the Make in India programme, which aims to expand domestic manufacturing capacity through policy support, tariff rationalisation and investment-friendly measures for strategic industries.
- Supporting PLI Framework: The exemption is designed to reinforce existing Production-Linked Incentive (PLI) Scheme by lowering input costs for eligible manufacturers. It aligns tariff policy with incentive-based industrial policy.
- Advancing Domestic Value Addition (DVA): A major objective is to increase Domestic Value Addition (DVA) by promoting local manufacture of components rather than relying on imported sub-assemblies. Higher DVA is central to India’s electronics manufacturing strategy.
- Integrating India with Global Value Chains: The policy aims to integrate Indian firms into Global Value Chains (GVCs) by enabling domestic manufacturers to supply internationally competitive electronic components meeting global production requirements.
Impact on India’s Electronics Manufacturing
- Higher Domestic Electronics Output: India’s electronics production has already crossed US$115 billion annually under government estimates.
- Lower production costs are expected to accelerate expansion in display assemblies, lithium-ion cells and inductor coil modules, supporting further manufacturing growth.
- Stronger Electronics Export Competitiveness: India targets US$500 billion in electronics manufacturing by 2030.
- Reduced production costs improve export competitiveness by enabling manufacturers to offer globally competitive prices for finished electronic products.
- Greater Investment Attraction: Stable customs policy until 2029 improves India’s attractiveness for multinational electronics manufacturers considering new investments in component manufacturing and advanced battery supply chains.
- Support for EV Battery Ecosystem: Reduced manufacturing costs for lithium-ion cells strengthen India’s rapidly expanding electric vehicle (EV) and energy storage industries, where batteries constitute a major share of production costs.
- Boost to High-Technology Manufacturing: The reform benefits production of advanced products including smartphones, laptops, wearables, automotive electronics, medical devices and industrial electronics, all of which rely on sophisticated display and battery technologies.
- Employment and Industrial Growth: The measure complements the Electronics Component Manufacturing Scheme (ECMS), which targets ₹59,350 crore in production, ₹22,919 crore government support, ₹4,56,500 crore in industry output and creation of 91,600 direct jobs, amplifying long-term industrial expansion.
IMPORTANT POINTS TO KNOW
- Basic Customs Duty (BCD): It is the primary import duty imposed by the Government of India on imported goods.
- It is levied under the Customs Act, 1962 at rates prescribed in the First Schedule of the Customs Tariff Act, 1975 or at lower effective rates notified by the government.
- The Central Board of Indirect Taxes and Customs (CBIC) administers its levy and collection.
- BCD applies to almost all imported goods, unless specifically exempted through a government notification or a concessional customs scheme.
- BCD is calculated as a percentage of the Assessable Value, which is generally based on the CIF value (Cost, Insurance and Freight) determined under customs valuation rules.
- There is no uniform BCD rate. The applicable rate depends on the product’s HSN classification in the Customs Tariff. Effective rates generally range from 0% to 40%.
- Along with BCD imported goods may also attract Integrated GST (IGST), Social Welfare Surcharge (generally 10% of BCD), Agriculture Infrastructure and Development Cess (AIDC), and trade-remedy duties where applicable.
- The Central Government may revise, reduce, enhance, or exempt BCD through Official Gazette notifications.
- Policies: Important government policies supporting electronic components manufacturing:
- The Production Linked Incentive (PLI) Scheme provides production-linked financial incentives on incremental sales of eligible electronics manufactured in India. It aims to attract global manufacturers, expand domestic production, and increase exports.
- The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) scheme offers a 25% financial incentive on capital expenditure for establishing or expanding electronic component, semiconductor and display manufacturing units.
- The Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme has a total outlay of ₹3,762.25 crore over eight years. It supports creation of Electronics Manufacturing Clusters (EMCs) and Common Facility Centres (CFCs) with plug-and-play infrastructure.
- The India Semiconductor Mission (ISM) provides fiscal support for establishing semiconductor fabrication (fabs), ATMP/OSAT facilities, display fabs and semiconductor design ecosystem to strengthen India’s electronics supply chain and chip manufacturing.
- The Design Linked Incentive (DLI) Scheme supports semiconductor and integrated circuit (IC) design companies through financial incentives, design infrastructure support and product deployment assistance.
- The National Policy on Electronics 2019 aims to establish India as a global hub for Electronics System Design and Manufacturing (ESDM) by promoting component manufacturing, strengthening domestic value addition.
- The Phased Manufacturing Programme (PMP) encourages progressive localisation of electronic components by introducing phased domestic manufacturing requirements.
- The Electronics Development Fund (EDF) supports venture capital investments in electronics, nano-electronics and information technology start-ups, promoting innovation, commercialization and indigenous technology development.
- The Digital India Programme creates sustained domestic demand for electronics hardware, communication devices and digital infrastructure, thereby supporting long-term growth of India’s electronic component manufacturing ecosystem.
FAQs:
1. Why has the government waived customs duty on electronics components?
To reduce manufacturing costs, deepen domestic value addition, strengthen electronics supply chains, and support Make in India and component manufacturing.
2. Which electronics components are covered under the duty waiver?
Specified goods for manufacturing display assemblies, lithium-ion cells, inductor coil modules, and selected wireless charging components.
3. How will this decision benefit manufacturers?
It lowers Basic Customs Duty on eligible inputs, reducing production costs and improving investment viability.
4. Will the customs duty waiver reduce electronics prices?
Potentially, if manufacturers pass lower production costs to consumers through competitive pricing.
5. How does the move support the Make in India initiative?
It encourages domestic component manufacturing, higher local value addition, and greater investment in India’s electronics ecosystem.
6. Which industries will benefit from the policy?
Consumer electronics, smartphones, electric vehicles, battery manufacturing, telecom, automotive electronics, and industrial electronics industries.
Disclaimer: Information in this article is based on official announcements and public records. Regulations and implementation details may evolve over time.
