Budget-conscious electronics companies seek lower tariffs
- ByStartupStory | January 16, 2023
The printed circuit board assembly (PCBA), connectors, and mobile phone camera modules are among the goods and components that the electronics industry has sought the government to lower tariffs on in the Union budget for FY24.
Some duty structures, according to industry organisations and stakeholders, need to be revised because they are now burdening the industry. They asserted that these fees are having an adverse effect on the industry’s capacity to reach production goals, which are necessary for the government’s “Make in India” push.
For instance, the India Cellular and Electronics Association (ICEA), a business group supported, among others, by Foxconn and Apple, recommended that the existing tariffs of 2.75% on parts, mobile phone components, and sub-assemblies be eliminated because they increase the burden on manufacturers and jeopardise the domestic industry.
The ICEA also pushed for lower import taxes on components used to make open cell panels for television production. Open cells are a crucial part of LCD panels, which are used to make TVs. Open cell components currently incur a 5% basic customs tax in India.
The contract TV market has experienced ups and downs in the last two years, according to Arjun Bajaj, director of Greater Noida-based Videotex International. This is because of commercial and geopolitical difficulties. He continued by saying that the budget presents the government with a chance to give the sector the “necessary boost”.
“The long-awaited key pain point for the smart TV industry that the government must take into account is the GST slab, which is 18% for up to 32 inches and 28% for above 32 inches models. Lowering these slabs will give customers more purchasing power, which leads to optimizing the market,” Bajaj said adding, the TV sector is anticipating that producers of mobile phones and IT hardware would receive production linked incentives (PLI).
Due to increased demand for larger displays and premium features in TVs, the average price of TVs in India increased 27% from the prior year in the first quarter of 2022, according to a Mint report from June of last year. Since more than 70% of components are still imported, in part because of the high tax of 8.25% on resins and other raw materials, the ICEA also urged a reduction in the duty on mechanics. Better coordination between the customs, income tax, and GST authorities is one of the demands made in order to ensure that taxes on royalties paid to foreign corporations by domestic electronics companies are taxed only once in accordance with the agreement between supplier and user.
Xiaomi, a Chinese OEM, was hit with fines last year for allegedly dodging taxes on royalties paid to its parent companies.
In the meanwhile, tax deduction at source was one of the modifications the Manufacturers Association for Information Technology (MAIT) wanted to see made to the direct taxes assessed against businesses (TDS). The threshold of 20,000 specified in Section 194R of the Income Tax Act was proposed to be raised to $1,000,000.
A tax payer must deduct 10% TDS from advantages or necessities that cost at least 20,000 in accordance with Section 194R. According to the organization’s pre-budget statement, “Given the current economic situation, the threshold limit should be increased to 1,00,000 to focus exclusively on ‘high ticket’ items/recipients and thereby lessen compliance burden for tax deductor.”
Wearable brands, too, sought reduction in duty on raw materials. “To strengthen our local product cycle, we look forward to reduced excise duties on raw materials and improved logistics to ease the supply chain metrics,” said Arnav Kishore, founder and chief executive of Fire-Boltt, a wearable company. Kishore said the ‘Make in India’ initiative should be further developed to allow more companies to avail benefits and grow amicably. “The budget should also focus on special incentives and subsidies for consumer electronics and component manufacturing,” he added.
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