Indian handset makers fear loss of investment and jobs if the recent government comments that countervailing duty exemptions will be removed in the goods and services tax regime are carried through.
Revenue secretary Hasmukh Adhia said on Monday that India was unlikely to provide any exemption from countervailing duty to IT or telecom manufacturers in the proposed GST regime. GST is an overarching tax structure that India is set to introduce in July. It would subsume all indirect taxes, leaving little space for offering incentives to individual sectors.
Adhia said the only way to create duty differential is to impose higher customs duty in some cases, but industry executives said such a case is yet to be presented to the government from the industry.
Since the introduction of an 11.5 per cent duty difference between imported and locally made handsets, local production in India nearly tripled to Rs 540 billion in 2015-16, during which about 40 new mobile phone manufacturing units and more than a dozen component units have come up in the country. The ICA had estimated local production to reach Rs 940 billion in the just ended fiscal 2016-17, riding on the current set of incentives which have been broadened to chargers, batteries and headsets in budget 2016-17.
He further notified that about 60,000 direct and an equal number of indirect jobs have been created by the local manufacturing industry, while component manufacturing units have added another 15,000 jobs.
The overhang of the new macro government policy is also a burning issue for several companies – Indian and foreign – that have already invested in setting up mobile phone manufacturing units to gain benefit from the duty differential.
For international investors who are already in India, say Foxconn, Flextronics and Salcomp, investments are going on. But suppliers who were pursuing to come to India for creating a viable ecosystem were now holding off their bets.
By Baishakhi Dutta
