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Hike customs duty on smartphones, tablets: Frost & Sullivan

Posted: 28 Feb 2013     Print Version  Bookmark and Share

Keywords:import duty  electronic products  Development Fund  fables  semiconductor IP 

Frost & Sullivan has sought incentives, including zero import duty on all raw materials and capital goods used for manufacture of electronic products and equipment. The market research firm has also asked the government to set up of Development Fund of Rs.21,857.92—Rs.27,322.40 crore ($4-5 billion) for promotion of Indian fabless companies and indigenous electronics and semiconductor IP generation companies.

Deepa Doraiswamy, Industry Manager – Electronics & Security, Frost & Sullivan, said, "The Indian electronics systems design and manufacturing (ESDM) Industry was estimated to be worth Rs.3.73 lakh crore ($68.3 billion) in 2012 growing consistently and expected to reach Rs.5.15 lakh crore ($94.2 billion) by 2015. Explosive growth in segments such as wireless infrastructure, energy efficient electronic products (such as LED lighting) and increasing consumption of mobile handsets, set top boxes, tablets, and consumer electronic products, are driving significant growth in the Indian electronics industry. Adding to this growth, is the expanding demand from automotive, aerospace & defence and medical applications where the usage of electronics is continually increasing and thereby boosting the demand for the Indian electronics industry."

"Despite the high consumption levels, local production has remained inadequate. Local production currently caters to about only 36.4 per cent of the demand. Continuing state of affairs shall ensure that the electronics import bill surpasses our crude import bill by the early 2020s. Pertinent steps in the form of the National Electronics Policy have already been unveiled. The need of the hour is focused fiscal incentives to promote industry growth."

Expectations from Budget 2013-14:

– Reduction/ elimination of excise tariff of tablets, smartphones, energy meters, smart meters medical devices and smart cards to promote local manufacturing.

– As Set top box demand is escalating owing to the digitisation mandate, there is the push from service providers to lower its custom duty to favour imports. However, given the high volume demand and the need for growth of indigenous industry, the custom duty on STB should not be lowered; rather it is preferred that it be increased. Further to promote indigenous manufacturing, preferential tax treatment can be meted to service providers who meet a minimal procurement demand (~30-35%) through local STB purchase.

– Hike in customs duty on products such as smart phones and mobile phones, tablets, smart meters, LED Lights etc so as to encourage local production.

—Zero import duties on all raw materials and capital goods used for manufacture of electronic products and equipment. Currently, many of the raw materials such as plastics, non-ferrous metals, etc. to name a few attract 5 -10 per cent duties that make local manufacturing more expensive and less attractive especially when the import duties on finished products are at 0 per cent. Therefore as an enabler for local manufacturing and value addition, it is pertinent that the import duties on all raw materials be made zero

– Setting up of Development Fund of Rs.21,857.92—Rs.27,322.40 crore ($4-5 billion) for promotion of Indian Fabless Companies and Indigenous electronics and Semiconductor IP generation companies

Conclusion
Tax Regularisation, Duty Restructuring as well as Financial Incentives are the need of the hour for encouraging local electronics production and the demand for the Indian ESDM industry.





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