Telcos ask finance ministry to clarify on import duty for routers

KOLKATA: Telcos have asked the finance ministry to clarify whether routers – a critical IT and network communication device – will attract import duty from January 1, saying such a levy would jack up 4G network expansion costs, hit future 5G deployment and run afoul of India’s obligations to the World Trade Organization.

At present , the router does not attract any basic customs duty. It is among about 200 items under the Information Technology Agreement (ITA-1) of WTO on which signatories, including India, have committed to eliminate customs duties. However, the government reclassified routers under the Finance Act (No. 2), 2019, and the Central Board of Indirect Taxes & Customs set January 1, 2020, as the implementation date for the new clauses.

Telcos, which import routers in bulk from global vendors such as Cisco Systems and Juniper Networks, have voiced their concerns to the finance ministry. The new rules don’t specify the codes for continuing duty-free import of routers, which has triggered uncertainty over the purchase process and costs for future procurements of these devices from foreign suppliers.

Rajan Mathews, director general of the Cellular Operators Association of India (COAI), which represents India’s telcos and overseas network vendors, said routers are “a critical link to the country’s digital communications infrastructure” and enjoy concessions under the ITA finalised at the WTO ministerial conference, 1996.

Increasing basic customs duties on tech products such as routers listed under (the rechristened) ITA-1, he said, would hit expansion of 4G networks, prevent cost-effective deployment of the upcoming 5G ecosystem and make mobile broadband services unaffordable to users.

“The sanctity of ITA-1should be maintained as India is a signatory, and routers of all kinds should remain exempted from BCD, and any attempt by the government to increase import duty on routers would (negatively) impact telcos and have significant financial implications on timely implementation of Digital India programme,” Mathews wrote in a letter dated December 19 to revenue secretary Ajay Bhushan Pandey. ET has reviewed a copy of the letter and other related submissions to the finance ministry. Mathews said there should be “no change in the listing of routers under ITA-1,” especially if “India aspires to be a global manufacturing hub and export to the world.”