Budget 08: iPods, PMPs to be Cheaper

This line from the 2008 Union Budget Speech had us scratching our heads for a while:

136. To establish parity between devices used in the information/communication sector and the entertainment sector, I propose to reduce the duty on convergence products from 10 per cent to 5 per cent.

What the hell is a converged device? These days everything from a phone to a PS3 to a wireless projector is a converged device! Well, after pouring through the complex Customs & Central Excise explanatory notes, this is what we found:

EXPLANATORY NOTES (CENTRAL EXCISE)
84.4 Concessional rate of 8% excise duty/CVD was earlier provided on MP3 player or MPEG 4 player. Now all MP3/MP4 or MPEG 4 players with or without radio/video reception facility will attract 8% excise duty/CVD.

EXPLANATORY NOTES (CUSTOMS)
84.3 Concessional rate of 5% customs duty was earlier provided on MP3 player or MPEG 4 players. Now all MP3/ MP4 or MPEG 4 players, with or without radio/video reception facility will attract 5% customs duty.

Ok, if this is all gibberish to you here's what it means:

Pure recorded audio devices (either MP3 or MP4) attracted 'concessional' customs duty of 5% and 'concessional' excise duty of 8%. The moment the PMP (Portable media player) added FM Radio capability or video viewing ability, the 'concessional' rate was not applicable and instead customs and excise of 10% and 16% respectively was charged. This of course makes no sense from a tech point of view. However, it does explain why the iPod Shuffle is so much closer to the dollar price in India than the iPod Nano or iPod video.

Anyway, Budget 2008 has removed this bizarre anomaly. All PMPs will now be taxed at the concessional rate. Varun Khandelwal of Lipap Systems, the official India distributors of Cowon told Tech2.com that prices of PMPs with video and/or FM would definitely come down and will be passed on to consumers.

We're still waiting to hear official statements from Apple, Creative etc. but rest assured, the news should be good!

UPDATE 1 Samsung India's Deputy MD, Ravinder Zutshi has this to say:

The reduction in the peak rate of customs duty from 10% to 5% on convergence products like MP3 players should lead to manufacturers passing on this benefit to consumers , thereby improving the affordability of MP3 players . This should result in accelerating the shift from the grey market to the organized market in the case of MP3 Players.