The government hit customs duty on imported mobile phones after switching to the goods and services tax (GST) regime as it seeks to give a boost to local manufacturing, ward off Chinese imports and induce companies like Apple to make in India. Such a move could, however, increase the price of imported smartphones by 5-10%.

Ministry of electronics and information technology said that imposing customs duty on phones will not violate the Information Technology Agreement, is allows duty-free imports of certain electronics products.

An inter-ministerial committee, comprising representatives from the finance, commerce, and telecom and IT ministries, has been set up to examine the issue in detail.

Government thought that zero customs duty is not helping the case of manufacturing in the country. There are certain exemptions that currently available to domestic handset makers such as no countervailing duty on imported electronic components will go after the GST regime comes into force. Imposition of customs duty will protect local manufacturers.

India has unilaterally exempted some electronic components from countervailing duty, levied in lieu of central excise duty. But this exemption may not continue under the GST regime, which will allow minimal exemptions. The finance ministry has asked the IT ministry to instead consider a change in the customs duty regime to shield domestic manufacturing.