NEW DELHI: The government is set to slap a customs duty of at least 10 per cent on imported mobile phones under the GST regime as it plans to retain benefits accorded to local manufacturing in line with the ambitious electronics manufacturing and 'Make in India' programme. Government sources said the duty can be notified later this week and could help address concerns of local manufacturers who have been worried about losing the edge they have enjoyed against imports.
"The import duty will be at least 10 per cent, and this is being done to ensure that manufacturing in India remains lucrative vis-a-vis importing the devices from China, or elsewhere," an official source said.
The move may not result in any increase in prices of imported smartphones, but will surely prompt some of the fence-sitters to look at a more engaged and exhaustive manufacturing set-up within India, the official said.
Companies such as Apple, while starting local sourcing in partnership with Taiwanese manufacturer Wistron (that assembles the iPhone SE at Bangalore), still import a large chunk of the requirements for what is sold here. Many Chinese companies, including Lenovo-Motorola and OnePlus, are also sourcing a substantial part of their India requirements through the import route.
The government had built up the duty differential between local assembly manufacturing against imports around two years back in line with its plan to encourage electronics manufacturing and `Make in India' programme. It currently levies a 12.5% countervailing duty on fully-made phones imported into India and a similar rate of duty on batteries, chargers and headsets of mobile phones. The government on Monday deferred the plan to get e-commerce companies to collect taxes from vendors and also did away with the need for government departments to deduct taxes from suppliers while paying GST in what is seen as the latest relaxation to help businesses transition smoothly to the new regime from Saturday .
"Government departments are liable to deduct TDS of 1 per cent while making payment of GST bills raised to them by suppliers. Similarly, e-commerce players such as Flipkart and Amazon are required to collect 5 per cent tax on the value of goods supplied by parties through their site. Now, this provision has been put off," explained tax lawyer R S Sharma.
The finance ministry said that the decision was taken with the objective of ensuring a smooth roll out of GST after taking into account the feedback received from trade and industry regarding the provisions. E-commerce companies have repeatedly said that they are not comfortable with the provisions, although tax officials insisted that the two provisions will be back on the agenda once companies settle down. They see it as crucial to track suppliers, many of whom have avoided taxes in the past.
Amazon India said, "We welcome the decision of the government to keep the TCS provisions in abeyance. This will benefit small businesses since they don't have to deal with pressures of cash flow at a time when they are transitioning into a new tax regime. We are grateful to the government for acceding to the request of the industry which is still in its infancy."
The rules have been relaxed also because many of the vendors are yet to register on GST Network.
Amit Sinha, COO of Paytm Mall, said, "The government's move to offer additional time for GSTN implementation will come as a relief to online sellers and consumers alike. We have undertaken several measures to ensure complete GSTN-compliance, and this added time will help us further enhance our current solution."
Tax consultants said the best way to implement the provisions would be to provide detailed guidelines along with case studies. Divyesh Lapsiwala, tax partner at consulting firm EY India, said, "The purpose is to track transactions and not collect taxes, and therefore it is imperative that the `collectors' have a clear point of view from the government. There would be no merit in later disputing with a collector why tax was not withheld correctly on the grounds of technical interpretation of provisions."
Source: timesofindia.indiatimes.com