Retain differential duty under GST: Handset-makers to government.

NEW DELHI: Handset makers have asked the government to continue differential duty advantage under the goods and services tax (GST) regime, and deincentivise import of fully built mobile phones by imposing higher rate than on locally produced phones.

Unsure of the slab rate under GST, representatives of the Indian Cellular Association (ICA) and Consumer Electronics and Appliances Manufacturers Association (CEAMA) separately met senior officials in the revenue department earlier this week to present possible solutions to keep local phone manufacturing going.

“We have proposed that the government introduces a new concept, a negative list under GST for imports and trading of goods, which includes mobile handsets, on which no credit of central GST should be allowed,” CEAMA vice president Sunil Vachani told ET after the meeting.

The GST Council is yet to decide the rate category for mobile phones, which are at the forefront of PM’s Make in India initiative.

India is set to produce mobile phones worth Rs 94,000 crore locally this fiscal, up from Rs 54,000 crore in 2015-16. The government took the first step towards creating a uniform tax rate structure for the country with GST, but decided on a four-tiered tax system - 5%, 12% 18% and 28% - with the first three rate slabs comprising goods of mass consumption.

The 28% slab is applicable to white goods, cars, pan masala, tobacco and aerated drinks. Additionally, a cess will be imposed on luxury products and products such as pan masala, tobacco and aerated drinks. A committee of secretaries will now allocate items into different tax categories.

Handset makers fear that lack of clarity on the duty dispensation could not only upset the momentum of local manufacturing growth but also put at risk investments made by device makers that assemble phones locally. They said if the duty differential is not continued, it may also threaten the proposed Phased Manufacturing Programme (PMP) that aims to make 1.2 billion mobile phones –worth Rs 15 lakh crore by 2025-26 – potentially employing 5.8 million people.

Both ICA and CEAMA have proposed an alternative, where import GST rate of 12.5% without any credit should be applied on phones that are imported.

In order to maintain differential duty structure for locally made phones, a nil central GST rate without input tax credit and state GST rate of 5% at each stage which is creditable, should be set.

ET has seen details of the presentations made by both associations that represent leading mobile phone makers such as Samsung, LG and Micromax besides consumer durable makers such as Haier and Videocon.

The government 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.

Senior officials from telecom and electronics and IT departments had earlier said that policy and regulatory framework would be supportive to the industry, seeking to position India as an emerging global hub for manufacturing of mobile phones. However, a final word from the government on the rates is awaited.

Source : economictimes.indiatimes.com