India’s TV import duty taxes travellers… and grey markets
India on Monday imposed a 36 percent duty on flat-screen televisions that travellers bring back from other countries, seen as another step to support a falling rupee. The move, however, will do little to help the economy but will cheer television manufacturers in India and hit grey markets, experts said.
India has taken various measures in recent months to deter the import of commodities such as gold as Asia’s third-largest economy tries to tamp down its current account deficit and a weak rupee that touched record lows below 65 per dollar this week.
The duty will not have significant effect on the rupee or on the current account deficit, which is estimated at 3.7 percent of the gross domestic product this year. With only seven months’ worth of foreign exchange reserves, India is taking a number of measures to narrow the gap between its imports and exports, though trying to discourage television purchases in foreign currency might not do much more than set an example.
“It is more symbolism that we are going to tax or discourage the import of luxury goods so maybe the next thing that will come will be (a duty on) import of other things like wine or cars,” said D H Pai Panandiker, president of RPG Foundation, a private think tank. “It’s such a small import that it is not going to make a very big difference to the current account deficit.”
Passengers last year brought in more than a million television sets from other countries, according to government estimates, taking advantage of a baggage allowance that exempted units costing up to 35,000 rupees ($547) from any duty.
People buy flat-screen television sets abroad because they can save money. A 40-inch LED television set that costs around 35,000 rupees in Bangkok can cost as much as 55,000 rupees ($859) in India’s retail market because of taxes.
“As per our calculations there would be around 1 million television sets which were coming, most of them finding their way to grey markets like Gaffar Market or Lajpat Rai Market,” said Suresh Khanna, secretary general of Consumer Electronics and Appliances Manufacturers Association (CEAMA). Such markets account for 15 to 20 percent of India’s television market, Khanna said.
Companies have spent more than 15 billion rupees ($234.2 million) in setting up television manufacturing facilities in India, experts say. While Sony does not manufacture products in India, Samsung started a manufacturing complex in Noida in the New Delhi suburbs in 1997. LG has television facilities in Pune and Greater Noida.
“The duty hike can boost the industry by 2-3 percent,” Indrajit Ghosh, Director (India and South Asia) at DisplaySearch said.
It’s not such good news for the grey markets, where people can find mobile phones, gaming consoles and flat-screen televisions of companies such as Sony and Samsung at cheaper prices.
New Delhi’s Gaffar Market, Alpha Market in Mumbai and Fancy Market in Kolkata offer everything from simple LCD televisions to a big flat-screen TVs with Internet features.
Televisions bought without receipts can cost less than a third of retail market prices, with dealers offering additional services such as installation for a small fee along with a 15-20 day verbal warranty.
Many passengers who were travelling abroad, buying televisions and selling them in markets such as Gaffar will be discouraged because of higher duty at the airports.
“Now this work will stop. There will be no business,” said Harish Chitkara, president of the MCD Market (Gaffar) in New Delhi, adding that around 1500 television sets are sold every month in the market. “They (traders) are going to lose money.”
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