Budget 2017: Cellphone makers expect incentives for making in India

NEW DELHI: Handset makers operating in India expect the government to continue duty differential regime for mobile phones in the upcoming budget, amid business slowdown due to demonetisation and the imminent implementation of goods and service tax ( GST) regime.

Some feel that while the government should enable environment to make mobiles cheaper in India, to make the country an export hub for electronics amidst growing competition, the Budget should include tax holidays and duty exemptions on capital goods imports to strengthen the Make in India proposition, for new and existing companies.

“A 10-year tax holiday for local mobile manufacturers, continued differential duty structure to encourage enhanced local manufacturing in India and increased incentive (as cashback) under Merchandise Exports from India Scheme (MEIS) scheme to 5% from the current level of 2% would go a long way in making India an export hub,” said Ritesh Suneja, group chief financial officer at Lava.

The industry is also expecting exemption of duty on import of capital goods used in the manufacturing of mobile handsets and components, besides redrawing of electronic waste norms, which some feel are regressive and unpredictable.

The 2017 Union Budget is scheduled to be tabled in Parliament next Wednesday, February 1.

In formal presentations that have been made to the government, the industry comprising of handset and component makers have proposed that components such as the keypad, USB cable, mic and receiver, die-cut parts and manufacturing of metal and plastic sub-components attract lower duties or levies.

When imported, these parts should be charged a higher levy – about 12.5% higher – akin to the differential duty regime offered for locally-made mobile phones, chargers, batteries and headsets. This will give a boost to both, the Make in India scheme and domestic component manufacturers.

The Indian Cellular Association (ICA), which represents all major handset makers such as Apple, Samsung and Micromax, among others estimates that imports of mobile phones are expected to drop 30% by value in this fiscal to Rs 40,000 crore, from 110 million phones.

The duty regime has attracted more than 40 odd companies to make phones locally, leading to creating Rs 54,000 crore worth of locally-made phones in 2015-16, which is set to rise to Rs 94,000 crore this fiscal end, from 175 million units.

Mobile phones are at the forefront of Prime Minister Narendra Modi’s Make in India initiative and the quick progress in this direction is the reason why companies and industry lobby groups are seeking similar incentives for other products.

“The extension of the duty differential scheme to the PC segment will definitely take India one step closer to making it an export hub,” said Rahul Agarwal, ?Managing Director at Lenovo India.

He added that Union Budget will be closely watched with factors such as demonetization and GST playing a key role this year. “There are a lot of expectations for 'Make in India' and 'Digital India'.”

While the government focuses on driving Digital India and cashless society plans, handset makers feel that smartphones will play a crucial role in supporting the digital economy and mobile banking vision.

“To create a truly inclusive digital economy, affordable mobile handset or consumer durable items up to certain value should be given a concessional duty treatment,” said Rajeev Jain, CFO, Intex Technologies.

The industry is equally concerned about the rates that mobile phones will be put under, after consumer durable products were put under a higher 28% slab.

While the industry is lobbying with the government that the products should fall under 18% GST slab, it wants GST on mobile phones to be 12%.

“GST, all set to be implemented this year, does not give a clear picture of differential duty on mobile handsets. While the industry anticipates mobile handsets to be placed under 12% GST slab, CGST credits shouldn’t be made permissible for imported mobile handsets,” said Manish Sharma, president and CEO, India and South-Asia at Panasonic.

For domestically manufactured mobile handsets, CGST at 0% should be applicable without input tax credits, he added.