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Phone companies seek higher tax on imports

Date 28-Dec-2017
Subject Phone companies seek higher tax on imports

Phone companies seek higher tax on imports

NEW DELHI: Handset makers have sought a further increase in custom duties on mobile phones and a similar tax on imported components to boost local manufacturing, besides a 10-year tax holiday to make India as attractive as China and Vietnam in the ease of doing business. 

"Basic customs duty (BCD) should be enhanced to 20%..." while BCD on components should be suitably calibrated after impact analysis, the Indian Cellular Association, which represents companies including Apple, Samsung and Micromax, proposed in its Union Budget recommendations. 

While the duty on mobile phones was increased to 15% recently, the association said there is room for a higher tax and that components should be brought in the ambit of customs duty. 

Imposition of anti-dumping, safeguard and countervailing duty should be considered as punitive measures to arrest the threat to the manufacturing sector, it said in a presentation to the finance ministry earlier this month. 

To make India as attractive as China or Vietnam, the association sought a 10-year tax holiday in a block of 15-20 years on income from manufacturing or from rendering services related to manufacturing of mobile phones, its core or ancillary parts, in special economic zones, export-oriented units and domestic tariff areas. 

"The proposed incentive may be subject to fulfilment of value addition norms or design-in-India norms, which may be calibrated to ensure that incentive reaches only deserving companies," it explained to the finance ministry. 

It said the absence of a tax holiday in India is considered a major impediment to large-scale manufacturing. The government's Make in India initiative started in September 2014 and within three years, 107 phone and compo-associanent making units were set up for brands such as Apple, Xiaomi, Oppo and Vivo. 

Samsung has also scaled up its local manufacturing. In 2017, India's mobile phone industry is expected to grow 47% in value to Rs 1.35 lakh crore and 30% by volume to about 225 million units. Imports of mobile phones have declined — 60 million units were shipped in this year, which is a 52% drop from 2016. The industry is aiming for zero imports by 2025. 


Pitching India as a global manufacturing hub, the association estimates 350 million units will be produced locally in 2018, taking the industry value to Rs 2.5 lakh crore. This may rise to 500 million units by volume andRs 3.5 lakh crore by value in 2019. It added that exports from India may rise to 70 million units valued at Rs 40,000 crore in 2018 from 10 million units worth Rs 6,000 crore this year. This may increase to 120 million phones in 2019, valued at over Rs 100,000 crore. 

For export growth, the industry has sought reforms of the Import of Goods at Concessional Rate rules so as to lower transaction and compliance costs and unlock working capital. 

Source:- Economictimes.indiatimes.com

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