Semiconductor Fabs to Benefit as Govt Scraps Import Duty on Critical Electronic Components

The Centre has expanded customs duty concessions for specified machinery, equipment, and components used in electronics and lithium-ion battery manufacturing by extending the validity of existing exemptions until March 31, 2029. 

The Finance Ministry has issued notifications waiving the basic customs duty (BCD) on goods used in the manufacture of key electronic components, extending the duty relief on essential inputs and capital goods for domestic production.

The government has removed BCD on capital goods and equipment used to produce lithium-ion cells for electric vehicles and consumer electronics, including machinery at various stages of cell manufacturing, to support domestic production.

It also includes machinery for powder preparation, slurry mixing, coating, and other production processes. It also covers auxiliary systems, such as solvent recovery units and effluent treatment plants, that support battery manufacturing. 

Additionally, the notification extends duty exemptions to certain inputs for manufacturing electronic goods, including PCBAs, camera modules, connectors, USB cables, and other specified components. 

The changes amend the customs exemption schedule by inserting and revising entries covering electronic components and lithium-ion battery manufacturing equipment. The notification specifies that imports must satisfy the conditions set out in the relevant exemption entries to qualify for the concessional treatment.

The duty waiver is intended to reduce the cost of importing critical manufacturing inputs while supporting India's electronics manufacturing ecosystem. Industry is expected to benefit from lower input costs for products such as smartphones, consumer electronics, and battery cells, although the notification itself does not specify any production or investment targets.

The latest customs notification forms part of the government's broader programme of tariff rationalisation for the electronics sector. In recent years, India has used a combination of changes to customs duties, production-linked incentive (PLI) schemes, and semiconductor initiatives to expand domestic manufacturing capacity and increase local value addition in electronics and advanced battery technologies.

The notification does not alter customs duties on finished electronic products; instead, it focuses on components, machinery, and equipment used in domestic manufacturing.