Mobile industry body Indian Cellular Association has sought a 10-year tax
holiday to scale up mobile manufacturing to international standards to help
India become competitive as against preferred destinations like China and
Vietnam. “ICA recommends that the 10-year tax holiday may be granted on a block
of 15-20 years on all profits and gains under Section 80 IA of the IT Act, 1961,
for manufacturing or rendering of services in or in relation to mobile handsets,
parts, component accessories and various core components subject to fulfillment
of value addition norms,” ICA said in its submission to the finance ministry.
The industry body acknowledged that some of the tax measures of the
government led to growth of mobile handset manufacturing by approximately 185
percent in value and 90 percent in volume in 2015-16 over 2014-15. “Rs 54,000
crore worth mobile handsets were produced during this period from Rs 18,900
crore in 2014-15. In the current financial year, manufacturing is estimated to
grow to Rs 94,000 crore, which would be an estimated 75 percent year-on-year
growth,” ICA said. The recommended tax holiday is expected to bring in fresh
investments in plant and machinery and other equipment of durable nature. ICA
estimates that Rs 1,000 crore of additional investments in plant and machinery
are required from every 130 million rise in production capacity.
According to ICA, boost to mobile manufacturing discouraged import of mobile
handsets by 4 percent in 2015-16 over 2014-15 and is further estimated to drop
by over 29 percent in the current fiscal over 2015-16. The industry aims to
produce 50 crore mobile handsets annually in the country with value around Rs
1.5-3 lakh crore by 2019 and production of 125 crore handsets with an estimated
value of Rs 15 lakh crore by 2025-26. The industry has set export target of 12
crore handsets by 2019-20, which can go up to 20 crore by 2019-20, and 80 crore
by 2025-26, as per the ICA submission. Currently, India does not offer income
tax incentives on manufacturing of mobile handsets and components, it said.
”While India is strongly positioned to replace China on establishment of a
robust mobile handset and component manufacturing ecosystem over the coming
years… Lack of availability of direct tax incentives is considered to be a major
impediment,” ICA said.
The industry body backed up, saying Vietnam offers 30 years of tax holiday
window at just 10 percent tax on mobile manufacturing along with other
incentives. The current manufacturing operations in China in the mobile handset
ecosystem is estimated at 32-35 times more and that of Vietnam’s mobile
manufacturing industry is 7-8 times bigger than that of India in value terms, it
noted. ALSO READ: New import norms becoming a hassle for mobile manufacturing
companies: ICA
“A deep analysis regarding establishment of robust mobile handset
manufacturing industry in China and Vietnam during the past decade would
indicate this fact that lucrative incentives, especially income tax holiday and
export benefits, compelled the industry to move to these destinations,” it said.
ICA said a phased manufacturing program (PMP) was instituted by the Ministry of
Electronics and IT (MeitY), which led to setting up of 15 new component
manufacturing, plants generating more than 20,000 new jobs. MeitY established a
Fast Track Task Force (FTTF) to establish a sizeable component industry with a
turnover of over Rs 50,000 crore by 2019. ICA has recommended delinking PMP from
budget, saying it “should be announced or notified in advance as a 4-5 year
program as per a Government of India commitment” as it takes at least a lead
time of 6-24 months for companies to execute plans to set up manufacturing
facilities depending on technological and capital criticality factors.
Source: http://www.bgr.in/