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Tax Insights
19 August 2022
Clarification issued on applicable customs duty on display assembly of a cellular mobile phone
Introduction
To promote manufacturing of cellular mobile phones in India, exemption or concessional customs duty benefit is extended to parts, components of the cellular mobile phones including sub-parts, and inputs used in the
manufacture of such parts and components, subject to compliance with the conditions laid down in the customs notification1.
One such benefit in terms of exemption or concessional basic customs duty (BCD) in the notification is extended to the display assembly for use in the manufacture of cellular mobile phones and inputs or parts or sub-parts and components used in the manufacture of the parts or components of the display assembly in the following manner.
Sl.
No.
Chapter or Heading or Sub-Heading
or tariff item
Description of goods Standard rate
Condition
5D Any chapter a) Display assembly for use in the manufacture of cellular mobile phones b) Inputs or parts for use in the
manufacture of display assembly c) Inputs or sub-parts for use in the parts
of the display assembly
10%
Nil Nil
Subject to compliance with the procedure set out in the Customs (Import of Goods at Concessional Rate of Duty), 2017
Although the notification prescribed the applicable BCD rate for the display assembly used in the manufacture of cellular mobile phones and its parts, including sub-parts, apparently, instances of display assembly declared as parts to avail exemption from BCD came to the notice of the Customs authorities. Hence, suitable guidance was sought from the Ministry of Electronics and Information Technology (MeitY) in 2020, and MeitY shared technical guidance about the constituents of a display assembly. The same in turn was shared with the field for
1 Notification No. 57/2017-Cus dated 30 June 2017
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formation for ease of reference for assessment of these goods for the payment of the applicable duty.
Apparently, mis-declarations continued despite the guidance, leading to investigation and issuance of demand notice by the Customs authorities in cases where the claim of concessional BCD of 10% as applicable to the display assembly was made on import constituting of assemblies comprising the display assembly and other parts of the cellular mobile phones.
The trade sought MeitY’s intervention in order to resolve the issue given the impact on the industry. Based on the representation by trade, reiterating its earlier technical guidance, MeitY provided additional inputs to the Central Board of Indirect Taxes and Customs (CBIC).
Based on the inputs provided by MeitY, CBIC has issued a clarification2 on the applicable Customs duty on the display assembly of the cellular mobile phone for the reference of the trade and local Customs authorities.
Clarification issued
The key aspects covered in the clarification are outlined below.
• As per the MeitY, the display assembly of a cellular mobile phone is an assembly of the components and sub-components which are put together to form a single assembly having the principal function of displaying images, text etc. The display assembly comprises the following constituents:
- Touch panel - Cover glass
- Brightness enhancement film - Indicator guide light
- Reflector - LED backlight - Polarisers
- Liquid Crystal Display (LCD) driver mounted on a Flexible Printed Circuit (FPC) - FPC specifically needed for rendering display functions
- LCM (Liquid Crystal Module or LCD Module) (consists of LCD cell or pure cell, FPC on Glass, and Chip on Glass] or OLED Module
• Hence, if the display assembly comprising the above mentioned constituents only comes with a back support frame of metal or plastic merely attached with it with no additional function, such assembly is to be considered as a display assembly for 10% BCD rate benefit (pictures and schematic representations of the constituents is provided in the guidance for reference as well).
• However, if the display assembly comes with additional parts such as mechanics or any other items, as an assembly, the whole assembly will attract a BCD of 15%.
• Based on consultation with the MeitY, the following guidance is extended to the Customs authorities for the purpose of assessment:
Particulars BCD
rate
Rationale
Display assembly imported with back 10% Back support has no essential function in display; only
2 Circular No 14/2022-Cus dated 18 August 2022
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support frame of metal or plastic to be treated as a display assembly
provides strength, structural stability and protection; and does not alter the essential characteristic of the display assembly.
Display assembly imported fitted with other items such as, slider switch, sim tray, battery compartment, etc. with or without back support frame of metal or plastic
15% Such assembly to be considered as general parts of cellular mobile phones under Tariff Item 8571 79 90.
Back support frame of metal or plastic imported individually or standalone basis
15% -
The takeaways
The clarification not only will enable the trade to revisit the eligibility of concessional customs duty on their import and take suitable action as needed. It may hopefully simultaneously help resolve the disputes pertaining to claims of concessional customs duty benefit on the import of display assembly of cellular mobile phones.
pwc.in
In this document, “PwC” refers to PricewaterhouseCoopers Private Limited (a limited liability company in India having Corporate Identity Number or CIN : U74140WB1983PTC036093), which is a member firm of PricewaterhouseCoopers International Limited (PwCIL), each member firm of which is a separate legal entity.
©2022 PricewaterhouseCoopers Private Limited. All rights reserved.
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