Component tax hike to make mobile LIP uncompetitive for exports: ICEA
Demanding a reduction in import duties on parts used to manufacture mobile phones, industry body ICEA said the increase in component taxes would make products made in India under the PLI program uncompetitive at worldwide.
The India Cellular and Electronics Association (ICEA) in its budget wish list demanded the reduction of the Goods and Services Tax to 12% from the current 18% as it is a disincentive for the growth of the domestic market and manufacturers as well as controls in adoption of mobile phones by the poor in rural India.
ICEA President Pankaj Mohindroo in a letter to the Ministry of Electronics and Computers said the Production Linked Incentive (PLI) program provides an incentive to respond to partial disability manufacturing costs in India compared to other countries such as China and Vietnam that existed before January, 2020.
“After the change in the structure of entitlements in the Union budgets for the financial year 2020-21 and the financial year 2021-22, the disability cost gap has increased further. on inputs will have a serious impact on the cost structures of PLI-approved companies, rendering their product uncompetitively priced for global markets,” Mohindroo said.
Contract manufacturers Samsung and Apple are the biggest investors under the PLI program and these two brands dominate mobile phone exports from India.
The government expects mobile phones worth Rs 10.5 lakh crore to be manufactured under the PLI scheme.
Mohindroo said the government has introduced a 15% customs duty on camera lenses and 2.5% on other parts, which makes camera module production in India competitive and has called for tax rationalization, as complete camera modules used in mobile phones can be imported by paying an 11 percent import duty.
The industry body called for the rationalization of duties on motherboards (circuit board assembly), mechanical components, etc. used in mobile phones as well as components used to manufacture mobile phone accessories such as lithium ion cells for power banks, raw materials for wireless. and audio devices, etc.
The ICEA said the hike in GST from 50% in March 2020 to 18% from 12% should be reversed as it slows India’s digital campaign and discourages growth for manufacturers.
“The 50% increase in GST in March 2020 dealt a cruel blow to the mobile phone industry. The justification presented to the GST Board was flawed. The sovereign assurance of no increase in cumulative tax was also accepted with this increase.In the pre-GST era, the excise duty plus VAT was 6% (in most states) and the weighted average was 7.2%. components, parts and accessories were duty free for manufacture,” the ICEA said in the budget wishlist separately.
According to industry body ICEA, whose members include Apple, Foxconn, Wistron, Lava and Vivo, mobile phone production in the country peaked at Rs 2.2 lakh crore in 2020-21 and is expected to cross Rs 2.75 lakh crore. crore by March 2022, which will increase significantly to meet domestic market demand.
“To achieve the goal of smartphones in the hands of every Indian and expand a $55 billion (approximately Rs 4 lakh crore) national mobile phone market, it is imperative to restore the status quo ante with regard to the GST on mobile phones from 18% to 12% This will help put mobile phones in the hands of disadvantaged sections of rural India, the poor as well as women and young people,” ICEA said.
The share of Indian companies in mobile productions has fallen from 47% in 2016 to around 8% currently.
The ICEA recommended the government to allocate Rs 1,000 crore to support Indian businesses, give them 5% interest subsidy for loans up to Rs 1,000 crore, credit guarantee up to to Rs 500 crore (revolving) for working capital requirements and domestic enterprises. under the PLI scheme is expected to benefit from an enhanced credit guarantee of Rs 1,000 crore.
“It is only when a country builds its own companies that true technology acquisition and skill building occurs in the country. Whereas a foreign company, although essential to start the ecosystem, depends of the arbitrage of manpower available in the country at any given time National champions with the potential to become global Indian champions have remarkable potential to create national wealth and become beacons of economic progress,” Mohindroo said.
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