Are Corporate Tax Cuts Not Enough To Boost Electronic Manufacturing?

• A top government official told ET that additional sops such as cheap credit and incentives for export are required to boost production
• Nirmala Sitharaman announced that new domestic manufacturing companies incorporated after October 1 will pay the income tax at the rate of 15 percent.

A top government official told ET that India may have to offer electronic manufacturers additional sops such as cheap credit and incentives for export along with infrastructure support in order to boost production and help the sector compete with China, Vietnam and Thailand.

The official told ET that Sops that are similar to the incentives for export under the existing Merchandise Exports from India Scheme (MEIS) are what the industry requires.

Last week, Finance Minister Nirmala Sitharaman slashed the effective corporate tax from 30 percent to 25.17 percent. She also announced that new domestic manufacturing companies incorporated after October 1 will pay the income tax at the rate of 15 percent.

The official told ET that companies are looking at relocating around 20% of their existing manufacturing from China. All these measures if adopted along with the tax cuts should work in attracting the investment, especially the component manufacturers.

Steps taken so far

Recently, the Manufacturers Association of Information Technology (MAIT) had also put forth recommendations in-line with the industry’s expectations to develop an export-led manufacturing ecosystem. The recommendations included offering production linked export incentive, leveraging India’s geopolitical influence and FTA influence with countries to accept BIS & TEC standards as sufficient to access their markets.

George Paul, CEO of the Manufacturers’ Association for Information Technology (MAIT) told ET that the Modified Special Incentive Package Scheme (MSIPS), which provided around 25% subsidy on capital investment, significantly helped the manufacturing ecosystem in the country and there is a need for an equivalent of the MSIPS to offset more of that disability. The scheme ended last year.