Ahead of the rollout of the goods and services tax, the government plans to levy an import duty of 10 percent on 4G telecom gear. This is not a good idea. On telecom and information technology goods, Indian policymaking does not happen on a clean slate: it has to abide by or scrap its commitments under the World Trade Organisation's Information Technology Agreement (ITA) of December 1996.It is true that 4G equipment did not exist in 1996 and is technically outside the ITA-1. India has kept out of ITA-2 of 2015, and there are no legal objections to subjecting 4G gear to customs duties. But there are practical and economic difficulties. It is best to continue with zero import duties on all telecom and IT products while granting deemed export status to all domestic production of such gear.
Obsession with customs revenues could scuttle Digital India and its promise of innovation, jobs and prosperity .IT products and components should be as cheap as possible. The economic gains from nationwide availability of high-speed wireless broadband outweighs any customs revenue from im port duties on IT and telecom equip ment. Also, how viable would it be to distinguish between imports of 3G and 4G gear? Having a differential duty re gime is open to disputes, delay and cor ruption. Going back on ITA-1 would spoil India's good standing and could invite reciprocal duties on Indian exports. What remains is the harm done to domestic producers: nil customs duty deprives them of the minimum protection from foreign competition other local producers receive. It is eminently feasible to protect genuine Indian manufacture by treating local production as deemed exports, and reimbursing the manufacturing taxes they pay .
When an imported product is duty-free, its local sale by a domestic manufacturer is effectively sale outside the domestic tariff area, and should bear no taxes, on par with imports. Further, India should have the domestic capacity to set indigenous standards and make sure imports meet them. This calls for regulatory capacity and efficiency , for which import duties are no substitute. - TOI