ASSOCHAM urges govt to extend Income Tax waiver benefits on cell phones.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the government to extend Income Tax waiver benefits to mobile-handset manufacturing in backward areas from 5 years to 10 years to help industry meet 100 per cent local demand for cell phones.

In addition the chamber has demanded withdrawal of safeguard customs duty of 1 per cent on mobile handsets with immediate effect to help broad base their sales at reasonable prices.

In a representation submitted to Ministries of Telecommunications, Commerce & Industry and the Finance by ASSOCHAM President, Dr. Swati Piramal it has also been sought that element of Value Added Tax (VAT) which currently varies between 6-14 per cent should be lowered to less than 4 per cent.

The aforesaid measures have become necessary to bring aam admi at countryside to telecommunication inclusion at affordable rates, said Dr. Piramal.

The representation points out that communication is a vital tool in social & economic development in India and therefore, availability of quality mobile handsets to everyone (those in villages and rural areas) at affordable rates is critical. Imposition of any customs duty will result in increase in cost of cell phones, adversely impact common man’s pocket and accessibility of mobiles to everyone, besides, widening parallel grey market offering cheap quality products thereby denting government revenue in this respect.

The import duty, according to ASSOCHAM is a barrier for entry of new entrants for setting up of a mobile handset manufacturing unit since even after setting up of a manufacturing unit, it is not feasible to initially meet 100 per cent demand locally and thus, transition to support manufacturing should be done imposition of customs duty on mobile handsets will also impact their competitiveness.

The ASSOCHAM is also of the view that mobile handset manufacturing units should be granted incentives by way of lowering the element of VAT on their sales. The VAT on sales of cell phones varies from 6 per cent to 14 per cent depending upon policy decisions of various state governments.

The chamber has further argued that accessibility and availability of mobile phones can be accomplished as intended by the government provided income tax waivers are extended to their manufacturing in backward areas for another 5 years. This will encourage mobile handset manufacturers to explore manufacturing in backward and ulterior areas which will also create employment opportunities for locals.

The aforesaid steps will promote climate for mobile phone manufacturing stressed the ASSOCHAM Chief pointing out that mobile handset manufacturing is a sun-rise industry for domestic players and it needs to be appreciated that any firm wishing to set up manufacturing unit and competing as a mobile phone manufacturer in India not only requires huge investment but also extensive technical know-how and innovation capabilities (including adaptation to rapidly evolving spectrum of technologies), local component manufacturing, manufacturing and supply chain efficiency, strong systems integration capabilities and an equally important after sales service & support.

Source : indiainfoline.com