The government on Thursday raised the customs duty from 10% to 20% on mobile phone parts, telephone communication items including telephone sets, telephones for wireless networks and other communication items. This recent move by the government can be seen as an attempt to reduce India’s current account deficit. Not only the current account deficit, but the government is also concerned about the depreciating value of rupee in comparison to US dollar, therefore, the recent development is being seen as government’s attempt to somehow raise the value of rupee.

Apart from the customs duty, the Finance Ministry on Thursday also levied 10% custom duty on smart-watches, optical transport equipment, combination of one or more of Packet Optical Transport Product or Switch (POTP or POTS), Optical Transport Network (OTN)products, Soft switches and Voice over Internet Protocol (VoIP) equipment. In addition to this, items like Carrier Ethernet Switch, Packet Transport Node (PTN) products, Multiprotocol Label Switching Transport Profile (MPLS-TP) products and Multiple Input/Multiple Output (MIMO) will also face 10% customs duty.

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This sudden increase in the import duty in selected items will come into effect from October 12. It has been the second time when the government has increased the customs duty on select goods in less than one months time.

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According to the Central Board of Indirect Taxes and Customs (CBIC), the government is satisfied that the customs duty has been increased on items falling under the Chapter 85 (which deals with electrical machinery and equipment including sound recorders, television image recorders and their parts) of the First Schedule to the Customs Tariff Act, 1975. Reports suggest that the government believes there are circumstances which were calling for an immediate action to be taken in terms of hiking the import duty.

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