Industry Calls For Incentivizing Mobile Manufacturing Under GST

As mobile phones are becoming the principal device to access digital services and help the society digitally empowered, industry bodies and digital think tanks suggest Indian government should offer more incentives to India based mobile manufacturing companies. They want governnment to include incentivization in the yet-to-be rolled out GST (goods and services tax).

Broadband India Forum (BIF), in association with knowledge partner Ernst & Young LLP (EY) Monday released a research paper which highlights the need to incentivize domestic mobile manufacturing in India under GST regime.

Indian government embarked on one of the world’s most ambitious broadband project with the “Digital India” program. Over the last few year, this program—that seeks to transform India into a digitally empowered society and knowledge economy—has resulted in tremendous online media consumption growth. Among the digital devices, mobile devices have taken over as the preferred medium of consuming online media. The 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. The adoption of smartphone in India will go up to 688 million by 2020 as compared to 238 million in 2015.

Wider deployment of 4G networks along with affordability and indigenisation of smartphones is going to drive mobile broadband to the next level of penetration via handsets. However, India is yet not prepared to meet this penetration demand.

T.V. Ramachandran – President of BIF explained, “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% 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 incentivise mobile manufacturing. This we believe is a win-win formula.”

Broadband India Forum (BIF), in association with knowledge partner Ernst & Young LLP (EY), has come up with a win-win formula for meeting this demand. They think that with the rapidly increasing demand, it is important to incentivize the local manufacturers to meet majority of the demand through domestic production.

Aruna Sundararajan. Secretary, Meity agrees with the suggestion too. He 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.”

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 mobile 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 joint study recommends.

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