Under the new GST regime which will kick in from 1st July, the government announced that it would slap a customs duty of at least 10% on imported smartphones.
The actual duty amount will be determined in the course of this week.
Other announcements pertaining to GST rollout were also made by the Finance Ministry.
The rationale behind the move
The move was made to protect domestic manufacturers from cheaply-priced imports which can have adverse effects on the domestic economy.
It was also made to discourage imports and prompt smartphone manufacturers to set up manufacturing units in India as per the government's ambitious "Make in India" programme for electronics and manufacturing.
Smartphone prices, however, are unlikely to go up.
Improving manufacturing in India
"The import duty will be at least 10%, and this is being done to ensure that manufacturing in India remains lucrative vis-à-vis importing the devices from China, or elsewhere," said an official source.
The current tax situation pertaining to smartphones
The government had taken measures to stimulate interest in setting up manufacturing units in India and protect domestic manufacturers from smartphone imports about two years back.
Currently, a 12.5% countervailing duty is levied on fully-made smartphones imported into India.
Similar duties are also charged for headsets, chargers, and batteries of mobile phones.
What are countervailing duties?
Often, foreign manufacturers receive subsidies from their governments and can sell goods at cheaper prices than domestic manufacturers. Countervailing duties are tariffs levied on imports to push up prices and level the playing field for domestic manufacturers and foreign manufacturers of the same product.
Finance Ministry relaxes certain GST provisions
After taking into consideration problems raised by trade and industry, the Finance Ministry relaxed certain provisions to ensure smooth GST rollout.
It had earlier planned to get e-commerce companies to collect taxes from vendors, a plan which has now been deferred.
It also did away with the need for government departments to deduct taxes from suppliers while paying GST.
Online consumers and retailers breathe sigh of relief
"The government's move to offer additional time for GSTN implementation will come as a relief to online sellers and consumers alike. We have undertaken several measures to ensure complete GSTN-compliance, and this added time will help us further...," said Paytm Mall COO Amit Sinha.