NEW DELHI: Differential rate of duty and incentives should continue while goods and services tax (GST) is implemented, a top government official said, adding that finding a way to integrate the two was work in progress.
“As far as department of IT and electronics and Department of Telecom is concerned, we believe that differential duty structure has had a very important role to play in seeding the manufacturing of mobile phones in India,” telecom secretary JS Deepak said, when asked about continuation of duty differential when GST is implemented.
“These are measures which are required along with incentives to offset disabilities, these are not permanent measures. We’re advocating that these kind of benefits should continue for a while, how it is to be done is work in progress,” he said, while speaking at an industry event.
Mobile phone manufacturers have approached the government, more recently the finance ministry, seeking continuation of the differential duty structure and the benefits that come with it, which they fear may become a casualty when the GST comes into effect.
Absence of these incentives could put at risk a manufacturing industry that is now worth Rs 54,000 crore and is expected to grow to Rs 94,000 crore by the end of this fiscal year.
If the duty differential is not continued, it may also threaten the proposed Phased Manufacturing Programme (PMP) that aims to make 1.2 billion mobile phones — worth Rs 15 lakh crore by 2025-26 — potentially employing 5.8 million people, handset makers have said.
The industry has demanded that the government keep at least a 10% duty differential between imported and locally made handsets in the GST regime to ensure that the Make in India proposition for mobile phones remains attractive.
The telecom secretary said that as per the Prime Minister’s Digital India vision, which talks of broadband for all, electronic manufacturing and design in India will continue to be promoted.
“There’s should be comfort in the industry that policy and regulatory framework would be supportive,” he said.
In device manufacturing specifically, Deepak said that India is well on its way to becoming a global hub for mobile phones manufacturing, which will be helped by a low wage ecosystem and development of skilled labour.
“The use of policy, tariffs, differential rate of duty, and other innovative ways permit, as well as other incentives to deal with disability of infrastructure, utilities and finance cost, will continue to be part of the package,” he added.
The industry had also proposed zero or 1% Central GST and State GST at a 5% merit rate (the rate for essential products that will be lower than the standard rate) on all phones and tablets, whether imported or made locally, and on their inputs, parts and components.
In their communications to the government, the industry has also sought that the duty dispensation be continued for another decade.