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Handset Vendors Making in India Seek Clarity on GST

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Cos seek continuation of duty structure that will make handset imports expensive
Handset vendors, worried about how the proposed goods and services tax (GST) regime will affect the Make in India initiative, intend to seek clarity from the government on incentives offered for manufacturing phones locally. The companies are preparing a proposal for the government, seeking continuation of a duty structure that will make it more expensive to import handsets than to produce them in the country. A formal request, with the consensus of all handset makers, will be sent to the revenue department.
“We're mulling a proposal where we will be asking the government to keep the differential duty structure as is in order to keep the benefits for local manufacturing,“ said Pankaj Mohindroo, chairman of the Fast Track Task Force established by the government to achieve its target of 500 million locally made handsets as part of the Make in India programme. “The states should levy a GST of 5% across the country.“ Under the proposed GST regime, most indirect central and state taxes, including excise duty, sales tax, service tax and value added tax, will be subsumed into one levy. The move is expected to widen the tax base, lead to greater compliance and reduce the extent of tax variations and concessions offered by different states.
“Since there would be minimal exemptions in GST, it would be difficult to create a differential duty structure between imported goods and goods manufactured in India. Therefore, clarity is required for the handset manufacturers as to how the incentives to make in India work in the GST regime,“ said Bipin Sapra, a partner heading indirect tax at EY India.
The government presently levies a 12.5% countervailing duty on fully made phones imported into India and a similar rate of duty on batteries, chargers and headsets of mobile phones. The government's move has worked so far. Foxconn Technology Group, the world's largest contract manufacturer, has started making phones in India and is expanding its presence and production portfolio. Indian handset companies including Micromax Informatics, Intex, Karbonn and Lava have set up assembly plants and are getting into assembling parts of mobile phones such as printed circuit boards and display units.
The Manufacturers' Association of Information Technology (MAIT), a hardware industry lobby group, said benefits offered under the `Make in India' programme should continue in the GST regime, given that businesses have made substantial investments and that such schemes take time to achieve fruition. “Benefits under the SEZ (special economic zone) scheme and excise duty-free zones, currently prevalent, should continue under the GST regime,“ said MAIT executive director Anwar Shirpurwala. The bill to introduce GST was passed in the Lok Sabha in May last year and is scheduled to be discussed in the Rajya Sabha on Wednesday.
The Economic Times New Delhi,03 August 2016

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