Govt may work on alternative solution for backing local manufacturing under GST

GST

The government appeared to be working towards creating alternative solutions to continue duty differential such that making mobile phones in India remains an attractive proposition even under the goods and services tax (GST) regime.

The common understanding was arrived on Wednesday evening, after joint secretaries from the Prime Minister’s Office and departments of IT, revenue, foreign trade and DIPP, among others held a two-hour long meeting with representatives of government-backed Fast Track Task Force (FTTF), which is implementing the plan to achieve 500 million mobile phones by 2019 under Make in India.

“We have absolutely no doubt that this office (PMO) will drive this program (local phased manufacturing program) because we get the sense that they’re extremely serious about Make in India and making sure that what we’ve set out to achieve in the mobile phone and component industry will happen,” FTTF chairman Pankaj Mohindroo, told ET after the meeting.

“They’re extremely serious about value addition,” he added.

The discussions at the meeting appear to have brought some relief to those who have put in thousands of crores to set up and expand local manufacturing of mobile phone devices in India, especially after revenue secretary Hasmukh Adhia’s recent comments 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.

Indian handset makers fear loss of investment and jobs if no alternative or protection was provided. “Differential duty has been instrumental in boosting the local manufacturing of mobile handsets and IT, withdrawal of the same can cause a major setback to the industry. However, imposition of higher custom duty can only be beneficial if the government decides to raise it significantly higher,” said Manish Sharma, president of Consumer Electronics and Appliances Manufacturers Association (CEAMA), suggesting imposing basic custom duty of 10% on mobile phones, from nil today.

During the discussions with the PMO, FTTF representatives raised concerns regarding discontinuation of duty incentives, which they said could throw a spanner in the larger plans of phased manufacturing to get more value addition into the country.

At a time when India wants to be the manufacturing destination for global companies, including Apple, a long term plan with predictable policy regime and associated benefits, or incentives, should be put forth for these companies to take long term bets on India, one of the executives present at the meeting, is learnt to have told the government on Wednesday.

For international investors who are already in India, like Foxconn, Flextronics and Salcomp – the world’s largest charger maker – investments are going on, but insiders say that suppliers that some of them were pursuing to come to India for creating a viable ecosystem are waiting and watching the final tax regime under GST. Apple too wants to get its ecosystem partners but has sought large scale incentives, besides continuation of duty differential.

Since the introduction of the 11.5% duty difference, handset production in India has increased by 185% to Rs 54,000 crore in 2015-16, during which about 40 new mobile phone manufacturing units and more than a dozen component units have come up. This is set to raise local production by 75% to Rs 94,000 crore in 2016-17, as per estimates from the Indian Cellular Association.

About 60,000 direct and an equal number of indirect jobs have been created by local manufacturing industry, and another 15,000 more jobs from component manufacturing units.

Source : http://telecom.economictimes.indiatimes.com/news/govt-may-work-on-alternative-solution-for-backing-local-manufacturing-under-gst/58050697

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