ICEA wants ‘nuisance’ tariffs on mobile phone parts to go, GST to be cut to 12%

ICEA wants ‘nuisance’ tariffs on mobile phone parts to go, GST to be cut to 12%

The electronics industry wants the government to rationalize and remove the smaller “nuisance” 2.75% rates on parts, components of mobile phones and sub-assemblies, as well as mechanics and the goods and services tax (GST) to 12% from 18 % decreased.

It also wants the basic customs duty of 20% on high-end phones capped at Rs 4,000 per device, in a bid to check smuggling of high-end phones, adding to the GST collection by Rs 1,000 crores.

In a letter to the government, the India Cellular and Electronics Association, which represents major electronics manufacturing companies, has called for a review of existing tariff structure for electronics manufacturing, and recommended a comprehensive study to assess and evaluate the existing tariff on products , as part of its recommendations for the upcoming union budget 2023-2024.

ET has reviewed a copy of the letter.

“Tariffs become a major challenge in improving India’s competitiveness in manufacturing global supplies where we lag behind Vietnam, Thailand and Mexico among others,” ICEA said in its budget recommendations.

“We emphasize that in the case of small tariffs, the traditional understanding of tariffs as the protection of the domestic industry fails. We call for particular attention to parts of PCBA, connectors and especially camera modules,” it added.

In an effort to increase the localization of manufacturing, the association called for a reduction of smaller “nuisance” tariffs of 2.75% on input components. “The stability of input rates is extremely important for the industry; however, the constant tinkering in input rates has made it very difficult for manufacturers in India to operate in a viable manner. The exemption notice itself must have a sunset of at least five have year,” ICEA said.

The electronics industry further demanded that products not made in India should be exempted from all duties. In addition, it called for zero duty on open cell assemblies for manufacturing color TVs from a 5% duty imposed in 2020.

The association also called for a ceiling on the imposition of 20% basic customs duty on high-end mobile phones, which it asked to be fixed at Rs 4,000 per device. This, it argued, would curb smuggling of high-end devices and add Rs 1,000 crore to the government’s GST collection.

ET reported that the government lost Rs 5000 crore in 2022 due to the gray market import of over 1.2 million units worth Rs 10,800 crore.

Further, ICEA has called for a reduction in GST rates for smartphones, color TVs and air conditioners.

“To achieve the goal of smartphones in the hands of every Indian, and to broaden a $55 billion domestic mobile phone market, it is imperative to restore the status quo ante with respect to the GST on mobile phones from 18% to 12% ,” the association said.

Apart from the demands to rationalize taxes and levies on finished goods, industry stakeholders have called for tax exemptions on capital goods to cover even the manufacture of parts and components.

Furthermore, ICEA insisted that the royalty on the importation of know-how be taxed only once according to the contract between the supplier and user of the know-how, which requires coordination between customs, GST and income tax authorities.

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