Handset makers operating in India expect the government to continue duty differential regime for mobile phones in the upcoming budget, amid business slowdown due to demonetisation and the imminent implementation of goods and service tax (GST) regime.
Some feel that while the government should enable environment to make mobiles cheaper in India, to make the country an export hub for electronics amidst growing competition, the Budget should include tax holidays and duty exemptions on capital goods imports to strengthen the Make in India proposition, for new and existing companies.
“A 10-year tax holiday for local mobile manufacturers, continued differential duty structure to encourage enhanced local manufacturing in India and increased incentive (as cashback) under Merchandise Exports from India Scheme (MEIS) scheme to 5 per cent from the current level of 2 per cent would go a long way in making India an export hub,” said Ritesh Suneja, group chief financial officer at Lava.
The industry is also expecting exemption of duty on import of capital goods used in the manufacturing of mobile handsets and components, besides redrawing of electronic waste norms, which some feel are regressive and unpredictable.
The 2017 Union Budget is scheduled to be tabled in Parliament next Wednesday, February 1.
In formal presentations that have been made to the government, the industry comprising of handset and component makers have proposed that components such as the keypad, USB cable, mic and receiver, die-cut parts and manufacturing of metal and plastic sub-components attract lower duties or levies.
When imported, these parts should be charged a higher levy – about 12.5 per cent higher – akin to the differential duty regime offered for locally-made mobile phones, chargers, batteries and headsets. This will give a boost to both, the Make in India scheme and domestic component manufacturers.
The Indian Cellular Association (ICA), which represents all major handset makers such as Apple, Samsung and Micromax, among others estimates that imports of mobile phones are expected to drop 30 per cent by value in this fiscal to Rs 40,000 crore, from 110 million phones.
Mobile phones are at the forefront of Prime Minister Narendra Modi’s Make in India initiative and the quick progress in this direction is the reason why companies and industry lobby groups are seeking similar incentives for other products.
While the government focuses on driving Digital India and cashless society plans, handset makers feel that smartphones will play a crucial role in supporting the digital economy and mobile banking vision.
The industry is equally concerned about the rates that mobile phones will be put under, after consumer durable products were put under a higher 28 per cent slab.
While the industry is lobbying with the government that the products should fall under 18 per cent GST slab, it wants GST on mobile phones to be 12 per cent.
By Baishakhi Dutta