Broadband India Forum (BIF), in association with knowledge partner Ernst & Young LLP (EY) released a research paper which highlights the need to incentivize domestic handset manufacturing in India under GST regime.
The country has embarked on one of the world’s most ambitious broadband project with the “Digital India” program, which seeks to transform India into a digitally empowered society and knowledge economy. Online media consumption has shown tremendous growth over the past few years. Among the digital devices, mobile devices have taken over as the preferred medium of consuming online media. Most of the users are now accessing internet via mobile devices and mobile devices are expected to reach masses.
Wider deployment of 4G networks along with affordability and indigenization of Smartphones is going to drive mobile broadband to the next level of penetration via handsets. With the rapidly increasing demand, it is important to incentivize the local manufacturers to meet majority of the demand through domestic production.
Speaking at the event T.V. Ramachandran - President of BIF said "While Broadband infrastructure is at one end of the issue, Customer Premise equipment (CPE) is at the other. The Broadband device today is a Smartphone. We need to increase Smartphone penetration as India has today less than 30 percent Smartphone penetration. This can only happen through local manufacturing and by further increase of local value addition. Further, Broadband India Forum (BIF) along with E & Y is proposing an innovative way using GST to incentivize handset manufacture. This we believe is a win-win formula.”
Speaking at the event Aruna Sundararajan. Secretary, Meity said “Ease of doing business and stable fiscal regime which the GST will bring to the forefront are likely to make India an overall attractive place for manufacturing. The early momentum that we have achieved actually needs to be sustained and further accelerated. This complementary study by EY & BIF providing how incentives can be continued under GST to the domestic handset industry with good quality analysis and information will be helpful for the Govt. to frame a better policy and boost local handset manufacturing.”
Speaking at the event Bipin Sapra – Partner EY said " Handset manufacturing industry has seen a tremendous growth in past few years driven by Government’s ‘Make in India’ initiative and policy changes such as duty reduction on domestically manufactured handsets. It is expected that the adoption of smartphone in India will go up to 688 million by 2020 as compared to 238 million in 2015. With the introduction of GST, most of the current Centre and state taxes/duties will be subsumed under GST. The Excise duty on manufacture which was a single point tax and the basis for all incentives would also be subsumed. Thus, it is expected that the incentives available to domestic manufacturers under the current regime would decrease and there is need to continue the incentives under the GST regime to meet the increasing demand through domestic production.”
While GST alone is not the driver for incentivizing manufacturing in a Country , some of absolutely essential factors for a sustained manufacturing environment in the country are infrastructure, a robust manufacturing ecosystem, skilled manpower, technology and R&D facilities etc. For the other factors to develop, it becomes important to grant incentives to the domestic manufacturing in order to set off the local disabilities.
The report attempts to share some thoughts wherein the benefits can be continued in line with the provisions of model GST law. The Government in various forums has mentioned that they are willing to continue the incentives in form of refund/ rebate / subsidies.
The actual incentive amount can be enhanced with a multiplier (‘N’) to grant a benefit that is at least equivalent to the incentive available under the current regime (i.e., approximately 8 percent—10 percent) with similar value addition, and higher incentives that can be granted when the local value addition in India is more.
Government may go one step further and extend similar benefits to the component manufacturers, which would encourage more investment in India and give a boost to the handset manufacturing ecosystem. Once the ecosystem is created, the prices of parts and components may also become more competitive, which, in turn, will reduce the cost of mobile handsets and make Indian handset manufacturers more competitive globally.
A recent study conducted jointly by IIM Bangalore and Counterpoint Researchers highlighted that the value addition in India is approximately 6 percent under the current state of manufacturing in India./ This can be increased up to 32 percent by 2020 wherein the most of the manufacturing processes in India. Thus, providing incentives can be a start to build the eco-system for mobile handset manufacturing and brining value addition to India. – Communications Today Bureau