Indian mobile handset manufacturers have sought a lower 12 per cent GST on the Parts and Accessories universe as per the phased manufacturing programme (PMP) roadmap as against the current 18-28 per cent.
“GST applicable on inputs/components /sub-assemblies/accessories of mobile handsets should not be more than that of the GST applicable on the final/end product which is the mobile handset. GST of 12 per cent recommended on the entire list of ‘Parts and Accessories’ Universe as per the PMP roadmap,” the India Cellular and Electronics Association said in its Budget 2020 wishlist.
Currently, the GST rate is either 18 per cent, or 28 per cent on parts. The problem has become extremely acute especially after the imposition of 10 per cent BCD (basic customs duty) on Printed Circuit Board Assembly (PCBA) as per PMP, it said.
The PCBA is a key component in the mobile manufacturing ecosystem. It sought continuation of BCD on mobile phones at 20 per cent.
“BCD on mobile phones should continue at 20 per cent, but with a difference. The maximum BCD should be pegged at Rs 4,000. The GST collection will go up by over Rs 1,000 crore and the market environment will become much cleaner and regularised and check smuggling and realization custom duty on declared price more than Rs 20,000,” the body said.
Association Chairman Pankaj Mahindroo said the adverse WTO judgement on export incentives can pour cold water on our great expectations of growth of exports in mobile phones which will hit $4 billion this year.
“We have made progress in both smartphones and component segments. As an export strategy It is critical that till such time the MEIS is replaced with a WTO-compliant scheme or a combination of schemes, the existing 4 per cent MEIS must continue and suitable budget provisions must be made,” he said.
The Merchandise Exports from India Scheme (MEIS) was expected to expire by December 31, but the government did not come out with any notification on the matter, and so it is expected that it may extend benefits to exporters under MEIS till March 31, when the updated Foreign Trade Policy 2020-2025 will become operational.
The body has also sought a Rs 1,000 crore fund for creating champion firms.
“It is strongly recommended that a budget head should be open in the Union budget with an allocation of Rs 1,000 crore for building Indian champion companies who are global leaders in the entry level segment,” he said.
The association has sought credit guarantee and interest subvention immediately for the handset makers. It has also sought caps to be removed and the Duty Drawback base be widened. The drawback rate is 4 per cent subject to a maximum incentive of Rs 197 per piece.
Keeping in view the increase in prices and the rates of BCD on the number of components, AIR drawback rate needs to be raised to at least 7 per cent with a cap of at least Rs 700, the body said.