Mobile phone costs will go up in India.

With the Budget 2017-18 bringing in a Special Additional Duty (SAD) of two per cent on PCBs or Printed Circuit Boards used in the manufacture of mobile phones, the prices of cellphones are likely to increase.

In a bid to push local manufacturing in the country, the government in its budget for the 2017-18 fiscal year has proposed a two percent special additional duty on import of PCBs, the key components of the mobile phones.

The government is aiming at companies locally manufacturing the PCBs and provide “adequate protection to domestic industry.” Though the move is likely to result in a marginal increase in the price of handsets, as these components are mostly imported. It is worth noting that PCBs alone contribute to 25-30 percent of the cost of the smartphones.

At this moment, it is not certain how the levied duty on PCBs will affect prices of mobile phones in the country. Notably, there has been some back and forth on the Special Additional Duty applicable on the populated printed circuit boards. While the budget had introduced the same 2 percent SAD, raising it from 0 percent, the government rolled back this import duty on May 5 last year - much to the chagrin of Make in India advocates who felt the move encouraged the philosophy of 'Assemble in India' instead.

In last year’s budget the government levied a 2% special duty on populated printed circuit boards used in mobile phones, laptops and personal computers.

The proposal triggered outrage in the industry, which said the ecosystem for local manufacturing of these components was not ready in India. Consequently, the duty was rolled back in May 2016. Ironically, the move will only affect those manufacturers that 'Make in India', and those that import their handsets in entirety are unlikely to be affected. It's possible that this cost burden will not be passed onto the consumer in the form of a price hike, and that manufacturers absorb the increased costs themselves. It may also be that 'unpopulated' PCBs are imported instead, as a loophole to the new regulation.