SCENE: A Virtual Coffee Break (Between Two Interactive Flat Panel Displays – Panelite and Displayo)
Panelite: Hey Displayo, did you catch the latest buzz about the Union Budget 2025? My audience is trying to make sense of it.
Displayo: Just heard it, Panelite. There is talk of change in rate of customs duty, specifically for us. It is quite a stir. Are we costly now? Are we in an elite club now?
Panelite: Hmm…That's what I'm trying to figure out. It seems like a mixed bag of pixels and potential problems.
Displayo: Tell me about it. It looks like we are due for a software update.
Introduction
The Finance Budget ushers in a new fiscal reality every year. This year, the Union Budget 2025 represents an effort of the Government to promote domestic manufacturing in the electronic industry and to address duty inversion. But how? By carefully balancing the Basic Customs Duty (‘BCD’) with the need for industrial growth.
This year’s Budget introduces a sleuth of measures regarding revisions to the BCD rates. One such revision appears to impact Interactive Flat Panel Displays (‘IFPDs’). While announcing the Budget, the Finance Minister mentioned the bump in the BCD rate from 10% to 20%. However, a dig into the Finance Bill, 2025 (‘Bill’) would reveal that the rate of BCD has only been increased for the goods classifiable under Tariff Item 8528 59 00. This might leave importers scratching their heads about the correct classification and the tariff rate of the IFPDs under the Customs Tariff (‘Tariff’). So, let’s break it down!
Classification of IFPDs: A tariff tangle
IFPDs are not defined in the Tariff or in any exemption notifications issued under Section 25 of the Customs Act, 1962. Think of IFPDs as advanced large interactive digital screens that combine high-definition visuals with touch-sensitive technology, allowing users to interact directly with displayed content using gestures, fingers, or styluses. They are like all-in-one PCs, packing a powerful processor and good amount of storage to do data processing. During Covid lock-down, it gained immense popularity and so gained momentum was, its classification.
While the importers sought classification of IFPDs under Heading 8471 attracting NIL (0%) BCD, the Customs’ department did not agree with it and suggested tariff item 8528 59 00, thus attracting duty. The Appellate Tribunal decided the issue in favour of the importers and held that IFPDs fall under tariff heading 8471.[1]
Interestingly, the World Customs Organization (‘WCO’), to which India is a signatory, also dealt with classification of Interactive whiteboard. The WCO also weighed that interactive whiteboards are classifiable under Tariff Heading 8471.[2]
The Finance Bill, 2025: What’s the real deal?
The Bill has proposed to amend the Tariff Rate mentioned against Tariff Item 8528 59 00, from 10% to 20%. Another notable change is amendment to Notification No. 50/2017-Customs dated 30 June 2017, by inserting new Sl.No. 515C to provide concessional rate of BCD to all goods classifiable under CTI 8528 59 00, other than IFPDs, and Sl. No. 515D to provide concessional rate of BCD to other components used for manufacturing of IFPD module.
The background and context behind this amendment was highlighted in the Budget Speech, 2025, where the Finance Minister stated that “In line with our ‘Make in India’ policy, and to rectify inverted duty structure, I propose to increase the BCD on Interactive Flat Panel Display (IFPD) from 10% to 20% and reduce the BCD to 5% on Open Cell and other..”.[3] Similarly, the Central Board of Indirect Taxes and Customs (‘CBIC’) has also chimed with its Frequently Asked Questions (‘FAQs’) in reference to the Bill, reinforcing that the increase in BCD for IFPDs is to correct the duty inversion.[4]
While the Finance Minister explained that this is all about supporting ‘Make in India’ and fixing the inverted duty structure, a closer examination of the Bill reveals an inconsistency in the revision. A literal interpretation of the Bill suggests that this amendment will impact only those products classifiable under tariff item 8528 59 00, thereby not affecting the IFPDs (which are otherwise classifiable under Tariff Heading 8471). Therefore, it seems that this measure to increase the BCD for tariff item 8528 59 00 is an incoherent solution to promote domestic manufacturing of the IFPDs, given that the IFPDs are classifiable under tariff heading 8471 and not under tariff item 8528 59 00.
That aside, one may assume that by introducing this measure, the Government is subtly taking a stance that IFPDs are classifiable exclusively under Tariff Heading 8528. Should this be the case, it directly contradicts the aforementioned judicial rulings in India and WCO ruling holing IFPDs are classified under Heading 8471 of HSN.
Therefore, while the Government may claim that the amendment aims to encourage domestic manufacturing and rectify duty inversion, the Budget fails to take note of the disputes around it and does nothing to resolve it.
Conclusion and way forward
In light of the background mentioned in Budget Speech 2025 as well as the FAQs by the CBIC, it is imperative for businesses to assess the applicable tariff rate on their IFPDs, on case-to-case basis. The first step? First and foremost, determine the correct classification of IFPDs. Only upon the determination of correct classification, can you ascertain if the rate change really matters.
[The authors are Associate, Principal Associate and Partner, respectively, in Customs practice at Lakshmikumaran & Sridharan Attorneys, New Delhi]
[1] M/s. Ingram Micro India Private Limited v. Principal Commissioner of Customs (Import), New Delhi, 2022 (2) TMI 308 - CESTAT New Delhi; See also, Compuage Infocom Ltd v. Commissioner of Customs, Chennai-II, 2022 (6) TMI 1403 - CAAR, Mumbai; In Re: Brightpoint India Pvt. Ltd., 2023 (6) TMI 657 (Authority For Advance Rulings Customs, Mumbai).
[2] WCO Ruling (60th Session – October 2017).
[3] Budget Speech 2025, “Electronic Goods” at paragraph 122 at page 21.
[4] CBIC, “Frequently Asked Questions (FAQs)”, Question No. 10 at pages 7-8.
