NEW DELHI: Handset makers have proposed the upcoming Union Budget bring some mobile phone components under the differential duty regime offered for locally-made devices.
This will give a boost to both, the Make in India scheme and domestic component manufacturers. The industry wants India made components such as the keypad, USB cable, mic and receiver, die-cut parts and manufacturing of metal and plastic sub-components to attract lower duties or levies. The same components, when imported, should be charged a higher levy - akin to rules for mobile phones, chargers, batteries and headsets.
"Domestic manufacturing of mechanics is a major transformation for the industry," said the Indian Cellular Association (ICA), which represents all major handset makers such as Apple, Samsung and Micromax, among others. "The principle of duty differential, phased manufacturing programme (PMP) and their continuation in the GST regime are crucial for a robust manufacturing ecosystem," it said, adding that it will strengthen India's position as a global mobile phone manufacturing and export hub.
Mobile phones are at the forefront of the Prime Minister's Make in India initiative. India has generated Rs 54,000 crore worth of locally-made phones in 2015-16, and is set to make it Rs 94,000 crore by this fiscal, from 175 million units.
In contrast, ICA estimates that imports of mobile phones will drop 30% by value in this fiscal to Rs 40,000 crore, from 110 million phones.The second level of PMP, under which exemption for the new set of components is being proposed, is estimated to create 1.5 million jobs by 2020 and 5.8 million by 2025-26, the association said.
ET has seen a copy of the proposal to the finance ministry as part of recommendations for the Budget, which also includes PMP implementation. ICA and Consumer Electronics and Appliances Manufacturers Association, another association that has interest of consumer electronics makers — including handset makers — at heart, have written to the government last month, asking that differential duty benefits be continued even when the goods and services tax (GST) comes into effect.
Industry experts say locally made components, given the tax benefits, would bring down overall cost of making mobile phones, making the prospect of local manufacturing all the more attractive.
At present, imported mobile phones are levied a 12.5% countervailing duty while 1% excise duty is levied on domestic manufacturing, making local assembly 11.5% cheaper. The same difference was extended to chargers, batteries and headsets in Budget 2016.
"About 40 new mobile handset manufacturing units and 15 component manufacturing units have been set up during the past year," ICA said. Uttar Pradesh and Andhra Pradesh together account for half the phone manufacturing units in the country, with capacity of 15 million phones a month.
The issue of continuation of the differential duty structure parallel with GST remains, even though officials have told the industry that incentives should continue and that the government was finding a way to integrate the two.
The industry had also proposed 0 or 1% central GST and state GST at a 5% merit rate (rate for essential products that will be lower than standard rate) on all phones and tablets, whether imported or local, and on their inputs and components.
Source: economictimes.indiatimes.com